Commercial International Bank (CIB) Egypt
Annual Report 2008

Plain-text annual report

Who We Are Our Businesses in a Snapshot Key Financial Highlights Key Facts A Strategy that Delivers Chairman’s Letter Board of Director’s Report The Year 2008 in a Nutshell Global Economic Turbulence- Snapshot Egypt, the Diversified Economy Financial Position Key Growth Drivers Synergy Realization Appropriation of Income Corporate Social Responsibility Key Financial Highlights Corporate Governance 2008 Review of Operations Institutional Banking Consumer Banking Support Functions Risk Management Credit Risk Market Risk Management (MRM) Operational Risk Management Compliance Strategic Subsidiaries and Affiliates Corporate Social Responsibility Financial Statements Financial Statement A. CIB Stand-alone Financial Statement B. Consolidated CIB & CI-CH 10 Years Historical Pro Forma Financial Statement Branches & Public Units 4 12 18 30 36 48 56 60 131 “The winner is the chef who takes the same ingredients as everyone else and produces the best results.” Edward de Bono 08 A N N U A L R E P O R T Who We Are Who We Are The Bank was established as a joint venture between Chase Manhattan and National Bank of Egypt (NBE) in 1975 and was originally named Chase National Bank. Chase divested its ownership stake in 1987 due to a shift in international strategy, and NBE acquired the stake. Following Chase’s divestiture, the Bank adopted the name “Commercial International Bank” (CIB). Over time NBE decreased its stake in CIB, eventually reaching 19%. In early 2006, a Consortium led by Ripplewood Holdings acquired NBE’s remaining stake. “A Reliable Business Partner” CIB 2008 ANNUAL REPORT WHO WE ARE 07 CIB offers a broad range of products and services to its customers and is a leading provider of financial services to large, medium and small enterprises, other institutions, households and high net worth (“HNW”) individuals. In addition to traditional asset, liability and custodial products, CIB offers wealth management, securitization, private equity and treasury services, all through client-centric teams. In addition, CI Capital, CIB’s wholly-owned subsidiary, offers asset management, investment banking, brokerage and research. We continuously strive to provide our clients with superior financial solutions to meet all of their financial needs. We believe this enables us to maintain our leadership position in the market, while providing a stimulating work environment for our staff, and delivering strong financial performance for our investors. Our Businesses in a Snapshot Corporate Banking CIB is widely recognized as the best corporate Bank in Egypt and is committed to being recognized as one of the best corporate Banks in the region, serving industry-leading corporate clients, as well as small and medium-sized businesses. Structured Finance CIB's global product knowledge, local expertise and capital resources make CIB an industry leader in project finance, syndicated loans and debt capital markets in Egypt. CIB's project finance and syndicated loans teams provide large borrowers with better market access and greater ease and speed of execution. Consumer Banking 2008 was a year of significant transition for the Bank that moved us closer to our objective of - Personal Loans Focusing on employees of our Corporate Banking clients and offering fully secured Overdrafts and Trade Products. - Wealth Management Offers a wide array of investment products and services to the largest base of affluent clients in Egypt. - Auto Loans Launched in December 2008 and positioned to actively support this growing market in the coming years. - Deposit Accounts Numerous account types to address our clients’ deposit and savings needs, such as Minor, Youth, Senior Citizen, Certificate of Deposits, Care Accounts as well as Current, Savings and Time Deposit Accounts. - Residential Property Finance Loans to finance home purchases, as well as residential construction, refurbishment and finishing. Treasury and Dealing Room Services Delivering high quality services in cash and liquidity management, capital markets, foreign exchange and derivatives. Investment Banking Services Through CI Capital, CIB offers existing and prospective clients a full suite of investment banking products and services, including investment banking advisory and execution, asset management, brokerage and equity research, providing deep and broad market knowledge and expertise. CI Capital is consistently ranked as the leading brokerage house serving local and international clients - Credit and Debit Cards Offering a broad in Egypt. range of credit, debit and prepaid cards. Private Equity Actively participating in select direct building a full-service, world-class consumer - Women Banking CIB is the only Bank that Bank. We offer a wide array of consumer banking offers a dedicated banking platform designed investment opportunities in Egypt and across products, including: to meet the unique needs of women and the region. assist in the promotion and expansion of their wealth and businesses. FY 2008 Financial Highlights FY 08 FY 07 FY 08 FY 07 FY 06 FY 05 FY 04 Consolidated Consolidated US$ Dec. 08 US$ Dec. 08 Consolidated Common Share Information Per Share - Earning per share (EPS) - Dividends (DPS) - Book Value (BV/No of Share) Share Price * - High - Low - Closing Shares Outstanding (millions) Market Capitalization (millions) Value Measures Price to earnings multiple (P/E) Dividend Yield (Based on closing share price) Dividend Payout ratio Market value to book value ratio Financial Results (millions) Net Operating Income Provision for credit Losses - Specific - General Total Non Interest Expense Net Profits Financial Measures Efficiency Ratio Cost: Income Return on Average Common Equity Net Interest Margin (NII /Average Interest Earning Assets) Return on Average Assets Regular workforce headcount Balance Sheet and Off Balance Sheet information (millions) Cash resources and Securities (Non. Governmental) Net Loans and Acceptances Assets Deposits Common Shareholders Equity Average Assets Average Interest Earning Assets Average Common Shareholders Equity Balance Sheet Quality Measures Common Equity to Risk-Weighted Assets Risk-Weighted Assets (billions) Tier 1 Capital Ratio Total Capital Ratio Adjusted capital adequacy ratio Net impaired loans after general allowances (millions) Net impaired loans to net loans and acceptance * Unadjusted to stock dividends 4.84 1.00 19.39 3.71 1.00 20.93 3.64 1.00 17.06 95.00 53.61 91.77 195 17,895 79.00 42.11 57.87 195 11,285 2.77 1.00 13.99 63.50 39.91 58.68 130 7,628 3.44 1.75 18.53 42.25 22.66 38.96 130 5,065 24.7 1.09% 15.8% 4.39 14.1 1.73% 27.5% 3.39 12.5 2.6% 21.3% 1.86 10.0 5.1% 51.4% 2.10 93.40 27.87 37.20 292.5 10,881 7.6 2.69% 18.1% 1.92 3,357 2,446 3,274 2,313 1,741 1,450 1,273 346 49 395 1,330 1,365 37.42% 39.61% 26.47% 4.03% 2.59% 4,014 15,941 26,330 57,462 48,790 5,817 52,684 43,935 5,159 N/A N/A N/A N/A N/A (577) (2.19%) 193 57 250 723 1,298 28.53% 29.56% 32.73% 3.28% 3.02% 3,508 22,484 20,479 47,906 39,476 4,501 42,730 35,827 3,939 N/A N/A N/A N/A N/A (448) (2.19%) 346 49 395 1,076 1,615 28.55% 32.34% 33.12% 4.06% 3.08% 3,792 15,964 26,330 57,128 48,938 5,672 52,396 44,602 4,876 14.93% 38 10.47% 11.72% 14.99% (577) (2.19%) 193 57 250 714 1,233 176 17 193 668 802 197 43 240 474 610 224 32 257 444 506 26.90% 34.73% 29.32% 25.82% 30.19% 38.38% 32.72% 34.92% 35.21% 26.49% 23.76% 22.19% 3.10% 1.94% 2,109 3.14% 2.37% 2,477 3.27% 2.90% 3,132 3.50% 2.09% 2,301 22,481 20,479 47,664 39,515 4,081 42,472 36,603 3,813 14,539 17,465 37,422 31,600 3,327 33,906 29,277 3,027 11,718 14,039 30,390 24,870 2,727 29,183 25,619 2,568 10,783 13,394 27,977 23,979 2,409 26,065 22,897 2,280 22 26 9.59% 13.60% 14.14% 13.83% 12.71% 30 19 9.78% 10.03% 10.17% 11.70% 10.84% 11.74% 11.38% 14.70% 13.60% 13.10% 12.50% (175) (1.31%) (113) (0.81%) (333) (1.90%) (448) (2.19%) 0.87 0.18 3.49 16.81 5.01 6.69 292.5 1,958 7.6 2.69% 18.1% 1.92 589 62 9 71 194 291 28.55% 32.34% 33.12% 4.06% 3.08% 3,792 2,895 4,776 10,361 8,876 1,029 9,503 8,090 884 14.93% 7 10.47% 11.72% 14.70% (105) (2.19%) 604 62 9 71 239 246 28.55% 32.34% 33.12% 4.06% 3.08% 3,792 2,891 4,776 10,422 8,849 1,055 9,555 7,969 936 14.93% 7 10.47% 11.72% 14.70% (105) (2.19%) CIB 2008 ANNUAL REPORT WHO WE ARE 09 More than About 50,000 electronic banking service users 500,000 customers served by over 3,700 employees Key Facts EGP 57 billion in total assets We serve over Over 100 “Fortune 500” companies 500 of Egypt’s largest corporations bank with CIB The ONLY The ONLY Egyptian financial Egyptian financial institution offering both institution offering both commercial and investment commercial and investment banking services banking services No. 1 Bank in terms of: - Market Capitalization in the Egyptian banking sector - Profitability, achieving 1.37 billion net income - Loan book and deposit base among all Egyptian private sector banks - Net-worth among all Egyptian private sector banks A Strategy that Delivers At CIB, our customers are our top priority and our continued success depends on our ability to satisfy their evolving needs. CIB’s outstanding financial performance in 2008 demonstrates the unique value proposition we offer our clients. Our unwavering client commitment is the basis upon which we will continue to provide our shareholders with consistent, high-quality returns. 20.1% 22.2% 23.8% 26.5% 34.0% 33.1% 1.9% 1.9% 2.1% 2.4% 2.9% 3.1% 2003 2004 2005 2006 2007 2008 ROAE ROAA We believe a key component of our success is our talented staff. CIB’s ability to offer employees an attractive work environment, myriad career opportunities and comprehensive training and feedback allows us to attract and retain the strongest banking professionals in Egypt. Our employees reciprocate with dedication to our customers, our community and CIB. CIB 2008 ANNUAL REPORT WHO WE ARE 11 Our Vision To be the best financial institution in the Middle East and Africa by 2020. Our Mission To provide the best financial solutions to our clients and create more value for our employees, shareholders and community. Our Objective To grow and help others grow. Our values A number of core values embody the way in which CIB employees work together to deliver effective results for our customers and community. Integrity: - Exemplify the highest standards of personal - We strive to lead the Egyptian financial - We value and respect one another’s cultural and professional ethics in all aspects of our services industry to a higher level of backgrounds and unique perspectives. business. performance in serving the millions of Egyptians who remain underserved or Respect to the Individual: - Be honest and open at all times. unbanked. - Stand up for one’s convictions as well as Hard Work: - We respect the individual whether an employee, a client, a shareholder, or a member of the communities in which we live accept responsibility for one’s own mistakes. - Discipline and perseverance govern our and operate. actions so as to achieve outstanding results - Comply fully with the letter and spirit of the for our clients and outstanding returns for - We treat one another with dignity and respect laws, rules and practices that govern CIB’s our stakeholders. and take time to answer questions and business in Egypt and abroad. respond to concerns. - Say what we do and do what we say. commitment to our clients. - We firmly believe each individual must feel - Seeking service excellence guides our free to make suggestions and offer Client Focus: - We work with our clients to reach their current constructive criticism. - Our clients are at the center of our activities goals while anticipating and planning for their and their satisfaction is our ultimate objective. future objectives. - Our success is dependent upon our ability Teamwork: to provide the best products and services to - We collaborate, listen and share information our clients; we are committed to helping our openly within CIB and with our partners, clients achieve their goals and be the best clients and shareholders. at what they do. Innovation: total corporate image. - Since our inception as the first joint venture Bank in Egypt, CIB has been a pioneer in - There is only one CIB in the eyes of our - Each one of us consistently represents CIB’s the financial services industry. We believe clients. innovation is a core competitive advantage and promote it accordingly. - CIB is a meritocracy, where all employees have equal opportunity for development and advancement based only on their merits. 08 A N N U A L R E P O R T Chairman’s Letter “I believe through learning and application of what you learn, you can solve any problem, overcome any obstacle and achieve any goal that you can set for yourself.” Brian Tracy Chairman’s Letter Dear Fellow Shareholders, The year 2008 was historically significant in many respects for CIB. First, the Bank celebrated its 31st year of record earnings in its 33-year history to maintain its position as Egypt’s most profitable Bank. Strong revenue and profit growth was evident across all business lines, with the exception of CI Capital, which is currently undergoing a significant restructuring. Corporate Banking, in particular, exhibited strong performance and widened its market leadership in corporate lending and project finance. The Corporate Bank’s stellar performance enables us to execute our strategy in building other key business areas, including retail and SME, which are still small but offer tremendous potential. Second, CIB has undertaken and made significant progress in implementing a number of ambitious initiatives. These include the continued build out of CIB’s Consumer Bank along with the restructuring of global Bank operations and back office support. In addition, the Bank is in the process of restructuring CI Capital, which involves additional investment and capacity building to position the enterprise for long-term success. While dedicating significant resources to execute these important initiatives, CIB has continued to deliver strong growth and profitability. In 2007, after several years of careful analysis, the Bank has positioned itself as the premiere office operations, freeing up staff to focus on we made the decision to build a world-class private sector Bank in Egypt, with superior asset sales and customer service within the branches. consumer banking platform. Our decision was quality and measured prudent growth. This is In addition, the Bank has completed the made after the market had finally exhibited some illustrated by the low level of Non-Performing segmentation of its customer base to enable signs that warranted our investments. Those Loans to Gross Loans ratio, which remained at staff to effectively serve the right customer with signs included a near-start of the long-awaited the 3% level at year end. credit scoring agency, a drop in real interest the right product/service. The Bank also soft launched its wealth management business in rates from the prohibitive levels of few years The Bank has been vigilant in maintaining four branches. During the year, CIB expanded ago, a reversal in the long term decline in real excellent relationships with its customers. The its branch network to 152 branches running disposable household income and many other experienced and knowledgeable management more than 472 ATMs. factors. Our decision was followed by team has a good understanding of client needs commensurate organizational changes and the and market circumstances. These unique CIB’s management and staff achieved outstanding recruitment of a new Consumer Banking CEO, characteristics enabled CIB to thus far withstand financial and operating results in 2008, despite who has a vast amount of experience and a long the current global economic turmoil. deeply unfavorable global market conditions. record of achievement in consumer banking in Throughout the year, CIB has continued to markets similar to Egypt. In last year’s letter, the following were set as implement changes across various business units our key priorities for the year 2008: and support areas. In aggregate, we view 2008 The other business line that experienced • Focus on customer-centric relationship to be a year of tremendous progress toward significant reorganization is CI Capital, CIB’s management to improve service quality. achieving our long-term objectives. capital markets business, which includes investment banking, brokerage, asset • Build and maintain the widest and most One of our key operating achievements in 2008 management and research. It became clear to customer-friendly physical and electronic was our success in augmenting our skill set with us at the beginning of 2008 that a wholly-owned delivery channels and network of all of the the addition of highly experienced managers investment bank is the most effective way to private and multinational banks. and staff, primarily in the Consumer Banking deliver a comprehensive product offering and Segment and Central Operations. value proposition to our clients, as well as fully • Continue to upgrade execution, service quality realize the cross selling potential across the CIB and customer satisfaction inside the The negative performance of the Egyptian stock platform. Hence, in 2008 we acquired 100% of branches. our CI Capital subsidiary. During the remainder market during 2008 was reflective of the global financial and market turmoil and did not appear of the year following CIB’s acquisition, CI Capital • Build the widest product portfolio among the justified by the country’s strong fundamentals has made a number of key accomplishments that Egyptian banks to attract clients who enjoy and lower financial risks on a relative basis. should place the business on the path to becoming one-stop-shopping services, saving both time Thus far, the financial crisis that began in the a leading player in investment banking in Egypt. and money. US housing market and grew to engulf the global economy in a deep recession has impacted Third, CIB remains one of the most stable financial CIB has made tangible progress implementing capital markets in emerging economies more institutions in the region due to its solid financial these priorities in 2008, and will continue to severely than the markets of those economies position, strong capitalization and stringent risk promote these strategies going forward. The that were the source of the crisis. management standards and procedures. In fact, Bank has centralized nearly all back- and middle- CIB 2008 ANNUAL REPORT CHAIRMAN’S LETTER 15 “The past year has undoubtedly been unkind to financial service companies in developed markets. Emerging market banks and their regulators should not dismiss this crisis as unrelated to their own situations.” Chairman’s Letter, CIB Annual Report 2007. As growth and economic expansion over the Most of the G7 countries are officially in recession. economies. The dry corporate credit lines that long-term in the emerging economies will be Leading indicators in the US and Europe have used to finance large companies’ operations stronger than in the developed economies, we consistently shown negative change during the have added new non-financial names to the list believe accordingly, that emerging markets should last 12 months. However, we might be sensing of companies at risk. Those companies are deliver stronger returns and capital appreciation. a light at the end of the tunnel, where a barely mainly operating in the construction, IT and positive leading indicators’ report for the US communication and automotive sectors. During Since the economic domino effect started over economy was published in December, although the last quarter of 2008, many multinational a year and half ago, the world business leaders not reflected in the current US treasury yield. companies failed to refinance their long term continue to face many uncertainties. Economists debt, to the extent that in some cases, they and research specialists alike have yet to Unfortunately, the crisis has gone well beyond failed to meet their short term obligations, this determine whether the world economy has being a global “Financial Institutions” credit is specifically evident in the automotive sector. bottomed, or will fall significantly further. crunch, especially within the G7 and BRIC Baltic Dry Freight Index index Jan 4,1985 = 100 Consumer Confidence number of standard deviations from long-run average 14000 12000 10000 8000 6000 4000 2000 0 2000 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 -2.5 -3.0 Japan (ESRI) Euro Area(EU survey) U.S. (Conference Board) 2002 2004 2006 2008 2004 2005 2006 2007 2008 The dramatic collapse in global freight rates is a sign of extreme near-term weakness in global trade flows. It is unlikely that the ongoing deleveraging would economy, from crumbling by providing abundant intervention, significant uncertainty remains have been as severe without the major capital liquidity and support. AAA-rated Asset Backed across virtually all capital markets. Accordingly, markets shock that occurred following the securities that were formerly perceived to most investors and market participants have collapse of Lehman Brothers in September. In constitute an investment safe haven are currently adopted a “wait and see” strategy, particularly an attempt to stabilize and support the credit trading with a 500+ bps spread. The global in markets where credit growth was most heated markets, Central Banks’ balance sheets have interbank open market nearly froze following the during the past few years. Capital market stretched significantly. In this respect, Central filing for bankruptcy by Lehman Brothers. While deterioration has continued into 2009 as the Banks rushed into saving selective banks, which these markets experienced a slow return to depth and breadth of the global have a direct impact on the welfare of the overall normalization as a result of Central Bank’s recession/deleveraging remains unclear. Central Bank Balance Sheets- Total Assets* index, end-June 2007=100 Term Interbank Market 3-month Libor/Euribor - overnight index swaps, bps 350 300 250 200 150 100 50 Dec 12 - coordinated CB liquidity measures announced Mar 17 - Fed approves financing of Bear Stearns purchase Sep 15 - Lehman Brothers files for bankruptcy 400 300 200 100 0 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Fed ECB Bank of England U.S. U.K. Eurozone *Assets valued in respective local currencies. Source: IIF Capital Market Monitor The current financial crisis has numerous causes, of 7.2% in 2007/2008. The government is to be due to falling commodity prices will lead to a but the lack of long-term planning and mad commended for its successful efforts to attract decrease in subsidies allowing the government scramble for attractive spreads and near-term both foreign and direct investments. Importantly, to boost spending without necessarily growing financial performance were clear factors the majority of the investments made were its budget deficit. Recently, the government precipitating the crisis. The “short-termism” that directed towards Industrial and Value Adding announced an EGP 15 billion economic stimulus seems to have been adopted by the current sectors amounting to EGP 43 billion. This back package that will include new infrastructure generation of business leaders in implementing log of business startups should help to maintain projects and other private public partnerships strategies and producing “novel” products has reasonable GDP growth rate in the coming year, to stimulate economic growth. led to severe systemic damage. We remain despite considerable global headwinds. hopeful that future generations of business and Accordingly, we foresee several positive forces government leaders will digest the necessary While trying to assess the coming 12 months that should help to widen our margins in 2009. lessons stemming from the current mistakes and economic outlook, many projections have pointed The steepening of the yield curve with the short missteps to avoid these errors in future decades. to an expected 4 - 5% GDP growth rate in end dropping on vanishing inflation expectations 2008/09, with a lot of uncertainty prevailing until and the long end remaining high due to large As for the Egyptian economic scene, Dr. Nazif’s we witness positive leading indicators. If achieved, sovereign debt should help improve our net interest cabinet has successfully navigated the Egyptian such a growth rate would be sufficient to help the margins. Unfortunately, such factors usually occur economy to another year of strong, broad-based economy overcome next year’s challenges. in the context of a slow economy which could economic growth, achieving real GDP growth On a positive note, easing inflationary pressures cause a spike in non-performing loans. Despite CIB 2008 ANNUAL REPORT CHAIRMAN’S LETTER 17 these risks, the Bank remains well prepared to tools should be oriented to address deflationary face any possible negative performance in the expectations of businesses and individuals rather domestic economy or global markets. than historical inflation indicators. Deflationary CIB’s strategy for 2009 is three fold; I. Remain a reliable partner to our existing customers and a prudent source of support for expectations could lead to unfavorable economic companies and consumers in these tumultuous Due to the CBE’s banking reform program and contraction. Accordingly, we are expecting cuts times; prudent regulatory approach, the Egyptian in the CBE target rates within the coming months. Banking sector was nearly immune to the toxic debt emanating from the US. In addition, the Once the winds settle down, significant II. Consolidate our position as the premiere Bank in Egypt by focusing on asset quality and liquidity of the banking system acted as a cushion opportunities across market segments should monitoring liquidity; against global liquidity pressures, with its abound for those banks well positioned to Loans/Deposits of only 58%. We are looking capitalize. Banks with strong financial positions forward to the next phase of the program that will grow stronger. We believe that in times such III. Continue building our consumer banking business, given the significant economy-wide will entail further requirements for Capital as these it is paramount to be prudent in under-penetration of consumer banking relative Adequacy, Accounting Standards and maintaining proper asset quality, sufficient to GDP. Consolidations. We believe that the CBE’s liquidity and strong capital ratios. Within the Monetary Policy Committee (MPC) will be coming 12 months, businesses should abide by capable of steering the economy away from any these policies with zero tolerance for deviations potential deflationary risk. Monetary policy and from appropriate risk standards and processes. Hisham Ezz Al Arab Chairman and Managing Director "Nothing stops the man who desires to achieve. Every obstacle is simply a course to develop his achievement muscle. It's a strengthening of his powers of accomplishment." Eric Butterworth 08 A N N U A L R E P O R T Board of Director’s Report Board of Director’s Report Despite worldwide turbulence in the financial sector in 2008, CIB was able to continue its strong performance and deliver solid results. The following is a review of the results and of the significant changes and events that took place during the past fiscal year, ending 31/12/08. The Year 2008 in a nutshell CIB aims to maintain its leading market position by continuing to provide high quality service and innovative products. The Bank’s success is ultimately driven by client satisfaction and retention of highly talented and hard-working employees. In conjunction with its renowned corporate banking franchise, CIB is dedicated to establishing the leading consumer bank in Egypt, where the Bank currently has the largest branch network amongst private sector banks, reaching 152 outlets and 472 ATMs in 2008. Moreover, during 2008 CIB introduced new lines of business and undertook organizational restructuring to address identified service and product gaps. For example, the wealth management services are currently offered in four pilot branches. Furthermore, the Bank has soft launched both auto and personal loans by the end of 2008. It’s worthy to mention that CIB’s market share from Egypt’s P.O.S. acquiring business has significantly surged to exceed 20%, up from virtually zero in early 2007. In addition, the Bank further penetrated the micro finance sector and the SME market, both of which are key contributors to Egypt’s continued economic development and expansion. A clear example is to leverage on our corporate clients, whereby we attract their bankable suppliers, through our well developed SME department. The Bank continues to offer its employees the preeminent training programs in Egypt, with updated and specially-tailored courses to enhance skills, service quality and product knowledge. The Bank continues to make significant investments in its IT infrastructure to enhance operability and firm wide productivity. Consistent with its strategic priorities, CIB acquired the outstanding stake in CI Capital Holding in July 2008, making CI Capital a wholly-owned subsidiary of CIB. CI Capital continues to make progress pursuing its expansion plans within the local market and across the region, capitalizing on its strategic relationship with CIB. The Bank’s ultimate objective to form Egypt’s premier financial and investment house remains in place. CIB was again recognized (for the 11th year in a row) by Global Finance as the “Best Bank in Egypt” for its exceptional performance and dedication in serving its customers. Emerging Markets named CIB “The Best Bank in Egypt”. The Bank’s focused efforts to build its consumer banking business were rewarded when CIB was selected as “Best Acquiring Bank” in a competition held by Visa Inc. The “Osoul” fund, managed by CIB’s Asset Management team, was ranked the No.1 money market fund by performance. In addition, CIB, through the Global Securities Services Division, has become the sole sub-custodian for all Egyptian Depositary Receipt (DR) programs. CIB maintained its credit rating at BB+/ stable/ B, according to Fitch and S&P, reaffirming the Bank’s sound management and risk control measures. Unrelenting focus on deepening customer relationships, expanding share of wallet and sound risk management all contributed to the Bank’s success in increasing its market share in the lending market to 6.56%, up from 5.93% in 2007, while CIB's market share in deposits rose to 6.28%, up from 5.36% in 2007.1 Global Economic Turbulence- Snapshot Over the past year, the world has experienced the worst financial crisis since the Great Depression. In mid- September, the crisis accelerated with the collapse of Lehman Brothers, which led to a freezing up of the interbank and credit markets and a steep fall in asset prices across global markets. The TED spread2 hit a record high, exceeding 300bps as a result of the crisis, reflecting the perception of a high default risk on interbank loans. 1 Market share is based on the latest November 2008 figures. 2 TED spread is the difference between the interest rates on interbank loans and short term US government debt “T-Bills”. CIB 2008 ANNUAL REPORT BOARD OF DIRECTOR’S REPORT 21 3-month TED Spread* U.S. Bank Losses* percent 7 6 5 4 3 2 1 0 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Libor (lhs) Tbill (lhs) TED spread (rhs) * Spread of US$ Libor over U.S. Treasury bill rate. Source of data: Capital Market Report; IIF bps 500 400 300 200 100 0 US$ billions 180 150 120 90 60 30 0 141.8 170.0 Mark-to-market Credit losses * Bank of America, Citigroup, Fifth Third, IndyMac, J.P. Morgan, KeyCorp, National City, Sovereign, U.S. Bancorp, Wachovia, Washington Mutual, and Wells Fargo. Reported losses since beginning of 2007. Current estimates of U.S. credit losses range from USD 1-2 trillion (with implied mark-to-market losses in excess of these amounts). With the ongoing deterioration in the U.S. economy, credit losses are expected to continue to rise. However, a number of positive steps have been taken by governments worldwide to stabilize the markets. The U.S. Treasury and Federal Reserve have implemented a number of new programs and guarantees to support the banking sector and credit markets, including the USD 700 billion TARP3 to infuse capital and support financial institutions that suffered severe losses in the crisis. In addition, financial institutions have been able again to issue U.S. government guaranteed commercial paper (CP) and bonds, enabling them to raise sufficient funds to refinance their maturing debt. Since the height of the crisis in the Fall, interbank rates in the U.S. and Europe have continued to fall, suggesting the markets are slowly returning to normalcy. However, much uncertainty and risk remains. Much will depend on how governments across the globe recapitalize banking sectors, restructure debt levels, stimulate economies and address global trade and capital imbalances. Bank Stocks MSCI indices (US$ returns), Jan 1, 2007=100 Cost of Credit Protection for Banks 5-year CDS spread, asset-weighted average, bps 100 80 60 40 20 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 U.S. U.K. Europe Source: Capital Market Report; IIF 3 Troubled Assets Relief Program 500 400 300 200 100 0 Jan-08 U.S. (Conference Board) Apr-08 Jul-08 Oct-08 Jan-09 U.S. large banks U.K. Europe Japan Egypt, the Diversified Economy Egypt has been able to maintain GDP growth In addition, the capital and financial account net inflows significantly grew from USD 0.85 billion in above 7% in each of the last two years, as a 2007 to USD 7.1 billion in 2008, due to the increase in foreign direct investment. In fact, the capital direct result of its well-diversified economy. The account showed a positive balance of USD 2.3 billion for the first time since 2004, as compared to major contributors to economic growth in FY a negative balance of USD 39 billion last year. 2007/2008 were tourism (4.2% of GDP, 24.3% growth), Suez Canal receipts (3.7% of GDP, FDI inflows/GDP has grown as illustrated in the following diagram: 18% growth), construction (4.5% of GDP, 14.8% growth) and telecommunications (3.3% of GDP, 14.2% growth)4. Such economic breadth and diversification is a significant point of strength in such challenging economic times. The Egyptian economy is expected to continue to withstand the storm, while experiencing slower growth rates, due to a probable decline in tourism revenues, net exports, foreign direct investment (FDI) and Suez Canal receipts. GDP is forecast to grow by 4% in FY 2008/09 driven by local consumption, FDI and the ability of GoE to Net FDI Inflows/GDP (%) 8.5 8.1 5.7 4.4 0.6 0.5 0.9 0.5 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 support domestic investment, especially SMEs Source of data: CBE and export-oriented businesses. In 2008, the country’s Balance of Payment (BoP) Egypt continues to be regarded as a safe place to invest, due to the country’s: surplus increased by 3% to reach USD 5.4 (a) Attractive demographics and domestic consumption, In light of the global economic meltdown, FDI is expected to decline in the coming year. However, billion, with a positive current account balance (b) Ongoing economic reform, of nearly one billion dollars. The surplus in the (c) Diversified economy, current account is attributable to a growing net (d) Liquid banking sector, services balance of 30%, realized despite the (e) Favorable factors of production and higher growth witnessed in services outflows. (f) Geographic location that would enable Egypt to act as an investment hub within the region. This was due to the surge in Suez Canal receipts and tourism revenues by 24% and 32%, One of the drawbacks of the extensive growth in demand seen over the past couple of years has respectively. Moreover, remittances of Egyptians been the deterioration of the trade balance, leading to a widening deficit. Moreover, the current working abroad increased by 35% (rising to USD global circumstances will likely lead to a downturn in exports and also in the services sectors (tourism, 8.5 billion as of FY 2008). Suez Canal, remittances). This is a further risk for balancing the accounts. In FY08/09, the current account is expected to turn into deficit affecting the overall balance of payments surplus and The trade balance deficit continued its historical representing one of the main threats in the coming period. trend, increasing by 44% during the year 2007/08. The surge in import payments of USD Several measures are being taken in an effort to minimize the spillover effects of the global economic 14.4 billion in 2008 was due to the increase in turmoil. The government has introduced an economic stimulus package (EGP 10-15 bn) to create imports of all commodity groups, including an attractive investment environment, support the industrial sector and, in turn, boost exports. The intermediate goods and raw materials, as well package entails the following: as consumer goods. In addition, the steep rise in energy prices during the first half of the year • Boost tax rebates for certain exporters by 50%, contributed to such rise (average price of oil USD 98.5 pb during 2008). • Exempt certain companies from sales tax cut customs duties and reduce import tariffs on certain capital and intermediary goods to zero percent. (Down from a range of 2-5%), 4 Source: The Financial Monthly, November 2008, Volume 4, No. 1, Ministry of Finance. CIB 2008 ANNUAL REPORT BOARD OF DIRECTOR’S REPORT 23 • Provide new financing for technology transfer and industrial training, The banking sector’s FCY utilization ratio of 69% is a cause for some concern, given the • Assist companies with storage and distribution costs and freeze electricity and natural gas prices liquidity pressures related to global financial at current rates for all factories through the end of 2009 and crisis and expected economic slowdown. • Freeze energy prices until the end of 2009. Other measures include a decrease in interest rates Thus, efficient management of FCY credit in light of the expected decline in inflation (expected to reach 10-11% during 2009). This estimate facilities is a priority, given current economic is based on the fact that 40% of the Egyptian inflationary pressure comes from food and energy circumstances. Having foreseen this, CIB has costs, which are rapidly falling worldwide. Accordingly, CIB foresees the CBE easing monetary implemented conservative credit policies to policy this year. The likely decline in interest rates should stimulate borrowing and investing activity in Egypt, particularly among SMEs. In addition, Egypt is one of the largest consumer markets in the region, due to its large population and growing per capital income. The Egyptian market possesses tremendous potential for both foreign and domestic investors. Domestic enforce thorough assessment of various credit risks including FOREX risk6. In addition, the Bank has managed to attract a stable FCY deposit base, mainly through capitalizing on our investors represent 70% of total investments, reflecting their critical importance to the country’s strong client relationships throughout the Bank. economy. Of course, FDIs will continue to be an important factor as a source of economic growth In this context, CIB recently launched its Wealth and to maintain a healthy BoP and a stable FX market. On the macro level, we will continue to monitor a number of factors carefully in 2009: investment growth, FDIs, Suez Canal receipts, sold touristic nights and remittances. Management services to cater to the needs of high net-worth customers. Over the past year, the country’s retail borrowing activity increased by 29%, growing from EGP Egypt’s liquid banking sector, as reflected in a Loans/Deposits ratio of approximately 55.5%, is 63 billion in 2007 to a record EGP 81 billion in a continued source of economic stability. Domestic liquidity increased by approximately 11.4% 2008, mostly in LCY. Auto loans represent in 2008, despite the ongoing global economic crisis. Total Deposits rose by 10.7% to reach EGP approximately 12 to 15% of this year’s new 773 billion in 2008, whereas FCY deposits still comprise approximately 27% of total deposits. individual borrowings. CIB believes it has chosen The increase in current liquidity is partly due to depositors’ outlook regarding the continued the right time to penetrate the consumer finance decline in inflation, which is leading to a postponement in consumption and a prolonged weak market with a well-established business platform. and volatile performance of the stock market. The country’s recently launched Credit Bureau “I- Score” should further boost consumer Total bank credit facilities grew by approximately 13.5%, rising from EGP 378 billion in 2007 to financing in Egypt, which still represents less EGP 429 billion in 2008. The growth is mainly attributable to the increase in facilities denominated than 10% of nominal GDP. The information in LCY by 11.3%, driven by the rise in the industrial and service sector borrowings by 13.7% and provided by the newly established I-Score should 1.4%, respectively. The increase in bank finance for these two sectors is in line with the growth help banks make a better assessment of default witnessed in value-added and private investments. It is worth noting that there has been an risk and relative pricing, while maintaining loan increasing demand for FCY facilities by both sectors, where the growth rate exceeded that of book quality. LCY facilities, as seen in following table. Credit Facilities Growth 2007- 2008 We are living in extraordinary times and the global problems are certainly affecting Egypt. However, thus far the government has proven to be responsive, and has the capabilities to target continued growth. Whilst the coming year FCY Facilities LCY Facilities is likely to be challenging, CIB is in a strong Total Industry Service Individuals 18% 18% 5% 95.7%5 11% 14% 1.4% 25.5% position to capitalize on the opportunities given Egypt's favorable macro fundamentals. The country’s populous, domestic consumption- driven economy and sound financial system provide Egypt with the opportunity to be a relative beacon of growth in the midst of a turbulent global economy. 5 6 Resulting from a very small base for comparison (EGP 3.3 billion in November 2007). The effect on the customers’ credit worthiness as a result of FX rate fluctuations or FCY funds availability Financial Position Preserving a high quality loan portfolio, applying risk management best practices and complying 30th, 2008, NPAT reached EGP 333 million, an increase of 1.8% over the same period in 2007. impairment and amortization of intangibles, on a consolidated basis the Bank grew by 23% with the various regulations have always been This year CIB acquired the remaining 50% stake compared to 2007 to achieve a NPAT of EGP entrenched in CIB’s conservative credit culture, in CICH, resulting in CICH becoming a wholly- 1,588 million. as reflected below in the Bank’s performance. owned subsidiary of CIB. As previously On a consolidated basis, CIB and CICH achieved mentioned, the NPAT on a consolidated basis CIB maintained its strong equity base and EGP 1,370 million Net Profit After Tax (NPAT) achieved for 2008 was EGP 1,370 million, which conservative capital adequacy ratio of 11.72%, respectively for YTD 2008. The Bank, on a stand- includes the impairment of Goodwill for EGP providing a solid measure of safety in these times alone basis, achieved a NPAT for YTD 2008 of EGP 1,615 million, an increase of 31.01% as 183.6 million based on the third party valuation. Also, the Bank amortized EGP 33.7 million of economic uncertainty. Affirming the Bank’s relative status as a safe store of value, CIB stock compared to the same period of 2007. Regarding the period from September 1st to December intangibles related to the acquisition of CI-CH. outperformed the Egyptian equity indices during Without the effect of the previously mentioned the most severe period of stock market decline. Comparative Returns RANGE 8/31/08 - 2/4/09 Period D Daily 157 Day Period Securities 1 COMI EY Equity 2 CASE Index 3 HERMES Index Crncy Prc Appr Total Ret Difference Annual Eq EGP EGP EGP - 29.18 % - 29.18 % 28.82 % - 58.00 % - 58.00 %* - 53.57 % - 53.57 %* 4.44 % - 55.16 % -86.70 % - 83.19 % COMMERCIAL INTL CASE 30 INDEX EGYPT HERMES INDEX 12 SEP 26 10 OCT 24 7 NOV 21 5 DEC 19 2 JAN 09 16 30 (* = No dividends or coupons) Source: Bloomberg 10 0 -10 -20 -30 -40 -50 -60 -70 The Bank’s NPLs/loans ratio remained stable that may arise from adverse movements in reach 4.06% as of December 2008. This at 3%. Moreover, in line with CIB’s conservative FOREX, Equities and Interest Rates. The expansion can be attributed to the Bank’s credit culture, loan loss provisions reached EGP conclusion of the aforementioned tests has effective Asset/Liability management, as well 1.4 billion as of December 2008, increasing by consistently proved the soundness of the Bank’s as its large depository base which provides the approximately 29.2% as compared to 2007. equity cushion and its well diversified risk profile. primary source of funding. Moreover, CIB Consequently, the Bank’s Coverage Ratio of maintains a favorable mix of deposits, with 44% 194%, reflects CIB’s ability to smoothly absorb The success of the management strategy is comprised of lower-cost demand and savings any unforeseen increases in NPLs. evident in CIB’s Return on Average Equity deposits. (RoAE), which reached 33.12% in 2008, as Although the Bank has been conservative and compared to 33.95% in 2007. Return on Average The Bank’s Cost/Income ratio increased slightly prudent in its trading book, FOREX and interest Assets (RoAA) maintained its consistent level to reach 32.34% as compared to last year’s level rate exposures, a specialized team has been of approximately 3%. Diluted Earning per Share of 30.19%. This was attributable to structural assigned to monitor the Bank’s market risk. Market Risk Management (MRM) is in charge rose by 30.45% to reach EGP 4.84. changes at CIB, as the Bank continued to build out its consumer banking business and hired of quantifying and modeling the Expected Loss Net Interest Margin (NIM) improved by 0.8% to close to 1000 employees. CIB 2008 ANNUAL REPORT BOARD OF DIRECTOR’S REPORT 25 At the end of December 2008, the CBE - Providing Personal Loans to customers were potential customer base for Consumer announced its amendment to the banking one of the latest additional services available Banking products as well as other products sector’s Financial Reporting Standards. As such, this year. new valuation methods relating to Available-for- and services offered by the Bank’s subsidiaries, such as insurance, leasing and Sale, Held-to-Maturity investments and - Modernization and enhancement of private equity. Derivatives have been applied to FYE 2008’s operations remain top priorities to enable financial reports. In addition, the comparable branch staff to focus on better serving - Supporting CIB’s SME finance business figures were restated. customers, while reducing costs, improving through the establishment of the first private processing times, and retaining high quality equity fund, managed by CI-CH to participate Key Growth Drivers Last year’s BoD report stipulated that the standards. corporate banking business is the main driver for the Bank’s growth, moreover, major changes Synergy Realization Capitalizing on CIB’s strong corporate in SMEs projects. The fund was a result of the collaboration between the Industrial Modernization Centre and CI Capital. have been achieved in the consumer banking relationships and broad product and service - Cooperation between CIB’s Wealth during 2008 as follows: offerings, the Bank and its subsidiaries continue Management (WM) division and CI Capital’s - Augmenting top and midlevel management, to focus on cross-selling opportunities as well Asset Management and Brokerage including appointing a new CEO of Regional as expansion opportunities both locally and companies, providing WM’s affluent Consumer Banking and recruiting regionally. In particular, collaboration between customers with access to unique investment experienced staff in several critical areas. CIB and its wholly-owned subsidiary CI-CH has products. enormous potential, including: - Launching new lines of Business, including - Coordination between CIB’s Corporate Wealth Management, Auto Loans and payroll- Banking Group and CI-CH’s investment Appropriation of Income The Board of Directors has proposed the based Personal Loans. banking unit to provide corporate clients with distribution of a dividend per share of EGP 1.00. a broader array of financing alternatives Moreover, increasing both the Legal Reserve by - Wealth Management aims to serve CIB’s top across the capital structure, a comprehensive EGP 80.75 million, to reach EGP 513.6 million customers, by offering savings, investment suite of asset and liability products and and the General Reserve by EGP 1,056 million, and insurance products as well as services, and financial and strategic advice. to reach EGP 1,463 million will reinforce the differentiated service. - CIB’s vast corporate client base offers a new Bank’s solid financial position as evidenced by a conservative Capital Adequacy Ratio of 11.72%7 7 Adjusted CAR (including profits attributable to shareholders) reached 15% Corporate Social Responsibility (CSR) Given the sense of duty and patriotism CIB feels towards our country, and consistent with prior years, we made a number of sizable donations and spearheaded several fundraising efforts in 2008. Based on our mission statement, “to grow and help others grow”, CIB is committed to act ethically and contribute to Egypt’s prosperity, while improving the quality of life of our workforce, their families and the local communities. Our community service initiatives focus on charitable organizations in three important areas: Healthcare, Education, and Social Support & Commitment. The following is a list of charities to which CIB made donations or helped support in the past year: Social Involvement: • Misr El Khair Foundation An organization dedicated to promoting education, healthcare services and food for impoverished Egyptians in Upper Egypt. • Yahya Arafa Children’s Charity Foundation A foundation dedicated to helping children who require surgical operations related to the bones and heart. • Arafa Charity Foundation A foundation dedicated to the provision of healthcare services for impoverished citizens in the Delta region. • Ein Shams University Hospital A public hospital serving disadvantaged individuals. • Mahmoud Hospital A hospital that serves individuals who travel into Cairo from surrounding areas to seek medical attention. • Khayrazad Organization for Social Care An organization that provides financial support for public hospitals within Cairo. • Lung Diseases Center - Faculty of Medicine Menoufeya University A public university hospital serving underprivileged individuals in Menoufeya. • Center for Social & Preventive Medicine, Faculty of Medicine, Cairo University Our donation will be utilized for the renovation of this under-equipped hospital, including an X-ray unit and a dentistry unit. • Three public schools Three schools have been chosen for renovation in disadvantaged communities in Upper Egypt. • Children’s Cancer Hospital Hospital 57357 is the first pediatric cancer hospital in Egypt and the Middle East providing effective management and treatment systems encompassing cancer prevention, education and research for children and their families for free. • The Egyptian Food Bank The first non-governmental organization aiming to abolish hunger in Egypt, through monetary and moral support from different organizations and individuals, in terms of supplying appropriate food to the truly needy on a continuous basis. CIB 2008 ANNUAL REPORT BOARD OF DIRECTOR’S REPORT 27 Key Financial Highlights: The following is a brief overview of key financial indicators on both a consolidated and a stand-alone basis for the year ended 31/12/2008: I. Balance Sheet (in EGP billions): a. CIB Stand-Alone Total Footings Contingent Liabilities Net Loan Book Investments Treasury Bills and Other Sovereign Securities Total Deposits Other Provisions Total Shareholders’ Equity & Net Profit for the Period b. Consolidated CIB and CI-CH Total Footings Contingent Liabilities Net Loan Book Investments Treasury Bills and Other Sovereign Securities Total Deposits Other Provisions Total Shareholders’ Equity & Net Profit for the Period Balance as of Balance as of 31/12/2008 31/12/2007 % Change 57.1 13.3 26.3 5.1 12.4 48.9 0.4 5.7 47.7 11.6 20.5 3.7 2.9 39.5 0.4 4.1 19.7 14.7 28.3 37.8 327.6 23.8 0.0 39.0 Balance as of Balance as of 31/12/2008 31/12/2007 % Change 57.5 13.3 26.3 4.2 12.4 48.8 0.4 5.8 47.9 11.6 20.5 3.6 2.9 39.5 0.4 4.5 20.0 14.7 28.3 16.7 327.6 23.5 0.0 28.9 II. Income Statement (in EGP millions): a. CIB Stand-Alone Interest Income Interest Expense Total Fees & Commissions Net Profit after Tax b. Consolidate CIB and CI-CH Interest Income Interest Expense Total Fees & Commissions Net Profit after Tax Net Profit after Tax and Minority Interest Balance as of Balance as of 31/12/2008 31/12/2007 % Change 3,772.9 2,993.4 (1,963.7) (1,796.7) 612.9 1,615 522.4 1,233 26.0 9.3 17.3 31.0 Balance as of Balance as of 31/12/2008 31/12/2007 % Change 3,765 (1,966) 748 1,365 1,370 2,998 (1,798) 640 1,289 1,286 25.6 9.34 16.9 5.9 6.5 CIB 2008 ANNUAL REPORT BOARD OF DIRECTOR’S REPORT 29 “Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” John Wetch Corporate Governance Corporate Governance The Board is responsible for providing leadership for the institution. It ensures that the right strategy and controls are in place in order to deliver value to shareholders, employees and the community. Corporate governance issues rate high within CIB, both in terms of aligning the interests of shareholders and managers and the monitoring of management through information disclosure and transparent reporting. CIB adopted a sound and effective system of corporate governance best practice, comprising highly professional executive directors and senior management, competent board committees, independent non-executive directors of experience and integrity. In addition to an internal audit and control department equipped with the best qualified and well- trained staff, an efficient investor relations program and two reputable audit firms with an impeccable record of accounting and auditing practice. Our corporate governance framework ensures that timely and accurate disclosure occurs with respect to material matters regarding the Bank, its ownership, operations and financial performance. It also advocates the equal treatment of all shareholders with sound protection to their voting rights. CIB has a practice of changing auditors every five years to ensure objectivity and to benefit from new practices. Another important strength is CIB’s board composition. The Board is comprised of a majority of non-executive directors who play key roles. The varied expertise of the non-executive directors has created an unusually strong combination of directors, all with relevant knowledge and balanced skills and experience. “Our Strong Commitment to Ensure That We Enjoy Sound Corporate Governance Help us Deliver Value to all Our Stakeholders" CIB 2008 ANNUAL REPORT CORPORATE GOVERNANCE 33 The Board of Directors The Bank’s management structure is based upon centralization of controls from the top Hisham Ezz Al-Arab Chairman and Managing Director MC8...C, HLIC...C Hisham Ezz Al-Arab joined CIB in 1999 as Deputy Dr. Nadia Makram Ebeid Member GCC...C Dr. Nadia Makram Ebeid is the Executive Director of the Center for Environment and Development management level at the Head Office. The Board Managing Director and was elected Chairman and for the Arab Region and Europe (CEDARE), an of Directors direct the Bank’s businesses by Managing Director in September 2002. He has international diplomatic position she assumes setting the overall strategy, and approves all had a wide experience of more than 30 years in since January 2004. For a period of five years operating policies. global banking activities that he gained in senior starting 1997, Dr. Ebeid was Egypt’s first Minister positions at JP Morgan, Merrill Lynch and more of Environment becoming the first woman in charge CIB’s BoD currently consists of two executive and six non-executive members with various recently Deutsche Bank in the United Kingdom, Middle East and the United States. of this position in the Arab World. During her earlier career, Dr. Ebeid was selected for several expertise. When a board seat is vacant, the Compensation and Governance Committee is responsible for nominating a member, subject to the board’s consent, who is then formally appointed after gaining approval at the General Mr. Essam El Wakil Member and CEO Institutional Banking RC...M, MC...M, HLIC...M Mr. El Wakil enjoys almost 34 years of experience managerial posts with the United Nations Development Program (UNDP), the United Nations Food and Agriculture Organization's Regional Office for the Near East, Council for Environment and Development Research. In support of her role Assembly and the Central Bank of Egypt. The in various business and supporting areas, in environmental policy and advocacy, Dr. Ebeid Directors meet at least four times per annum. exemplified by: Credit, Corporate, Project and has received numerous awards of recognition and During 2008, the Board of Directors convened Trade Finance, Investment Banking and Strategic distinctions from local and international NGOs, six times. Planning. Mr. El Wakil is a board member of the leading institutions and associations. Federation of Egyptian Banks “FEB”. Starting early 2006, a group of experienced business leaders representing Ripplewood Holdings L.L.C., Eton Park Capital Management, RHJ International and International Finance Mahmoud Fahmy Member AC...M, GCC...M Counselor Fahmy is a renowned Egyptian lawyer Robert Willumstad Member AC...C, RC...C Robert Willumstad is the former Chairman and CEO of AIG and until recently was President and Corporation have been part of the Board. This and international arbitrator. He was the Chairman Chief Operating Officer of Citigroup, and a member group includes Robert Willumstad, the former of Egyptian Capital Markets Authority, the General of its Board of Directors. After 20 years with President and Chief Operating Officer of Authority for Investments, and the Secretary Chemical Bank, and 11 years with Commercial Citigroup, Lucio Noto, the former Chairman and General of the National Counsel. Credit and its successor companies, in October Chief Executive Officer of Mobil Corporation, and Tim Collins, Chief Executive Officer of Ripplewood Holdings. Paul Volcker, former Chairman of the Federal Reserve Bank, serves as Senior Advisor to the Board. William Mikhail Member and Chairman of the Audit Committee AC...C, RC...C Dr. Mikhail is currently an Econometrics professor 1998, Mr. Willumstad played a critical role in creating Citigroup, a history making combination of the former Travelers Group and Citicorp. After serving as the Head of Global Consumer Lending, Mr. Willumstad was the Chairman and CEO of at the American University in Cairo (AUC), and Citigroup’s Global Consumer Group from 2000 Accordingly, the Board of Directors in its new a member of CIB’s Board since 1997. He obtained to 2003, where he led all consumer businesses, and expanded form consists of the following his Ph.D. from the London School of Economics, including credit cards, consumer finance and retail individuals: London University, in 1969. In addition to his banking. In addition, he had oversight of Citigroup’s academic career, Dr. Mikhail also worked with consumer operations in Western Europe, Japan international consulting firms and as a U.N. and Mexico. consultant on Econometric Modeling and Economic Policy analysis in many countries for Mr. Willumstad, President of Citigroup in 2002, more than two decades. He published extensively joined its Board of Directors in 2003; becoming in econometric theory and applied econometrics Citigroup’s Chief Operating Officer in October in international journals, and supervised many 2003. He is a Director of MasterCard Ph.D. and M.A. theses in both Cairo University Incorporated/MasterCard International and the American University in Cairo. Incorporated and Habitat for Humanity International. He is a trustee of the American Scandinavian Foundation and Adelphi University. 8 Please see the references part, for all abbreviations, at the end of this section Tim Collins Member GCC...M Timothy C. Collins is the Chairman and Chief Lucio Noto Member AC...M Lucio Noto is the Managing Partner of Executive Officer of Ripplewood Holdings, L.L.C., Midstream Partners, L.L.C., an energy which he founded in 1995. From 1991 to 1995, investment company. Mr. Noto assumed his Mr. Collins managed the New York office of current position in March 2001, after retiring as Onex Corporation, a Toronto-based investment Vice Chairman of Exxon Mobil Corporation in company. Mr. Collins was previously Vice January 2001; a position he had held since the President at Lazard Freres & Company. merger of the Exxon and Mobil companies in he received an M.B.A. degree from Yale University's School of Organization and November 1999. Mr. Noto has been directing Altria Group since 1998. Mr. Noto was Chairman Management and a B.A. degree in Philosophy and Chief Executive Officer of Mobil Corporation from DePauw University. before the merger. Mr. Noto was employed by Mobil in 1962. Mr. Noto is the Director of International Business Machines Corporation and United Auto Group Inc. He also works for the International Advisory Councils of Mitsubishi Corp. (Tokyo) and Temasek (Singapore). The Board of Directors’ Committees Following the expansion of the Board of Directors during the first quarter of 2006, the Board will oversee the Bank through the Board Committees and the reports generated to evaluate the Bank’s periodic performance regarding all aspects of operations. As such, the Board will meet around six times a year, physically or through Video or Tele-Conferencing, in Egypt, with one meeting held in New York City. In addition to the Board’s Audit Committee, Risk and Governance and Compensation committees, CIB has recently established High Lending & Investment Committee as well as Management Committee. The structure of each committee ensures the highest standards of corporate governance, empowers it and links it to the strategic direction of the Bank. Audit Committee CIB was one of the first banks in Egypt to set Audit Committee Governance and Compensation Committee Shareholders Board of Directors Management Committee Risk Committee High Lending and Investment Committee The Committee’s mandate was extended and in relation to risk management, Basel II up an audit committee of the Board in compliance articulated in greater detail in the years that compliance, money laundering, as well as with the basic principles of corporate governance. followed, especially in light of the Central Bank internal and external audit practices. In September 1998, the Bank’s Board decided of Egypt’s issuance of a number of rules to be to form the committee in order to ascertain the observed and guidelines to be followed in June Three independent board members form the soundness of the Bank’s internal audit system 2002. Accordingly, the role of the committee audit committee. They meet exclusively and and compliance with the rules specified by was redefined in September of the same year regularly with the Bank’s external auditors. Bank regulatory authorities. to emphasize its independent nature. Its scope executives are regularly invited to attend certain was also modified to be more specific, especially meetings when relevant issues are broached. CIB 2008 ANNUAL REPORT CORPORATE GOVERNANCE 35 The Governance and Compensation Committee The Committee is responsible for the development and reviewing of a set of Corporate Governance Guidelines, which are then recommended to the Board. The Committee reviews the remuneration of the Board of Directors (both executive and non- executive members.) This also incorporates any stock option proposals to the Bank’s Executive and Senior Management Staff. It is also to act as a nomination committee when a board seat is vacated. The Risk Committee On the macro level, this committee sets the Bank’s “Credit Risk Strategy” and the portfolio mix (concentration and limits) for corporate, retail, banks, countries, etc. to be approved by the Board. Exposures according to risk rating, It is composed of the Bank’s top executives who amount and tenor are approved by other regularly review and decide on the credit facilities, committees led by the High Policies Committee. equity investments, focusing on the asset quality, Management Committee The Chairman, CEO of Institutional Banking, allocation and its development. They are responsible for taking decisions of an executive or administrative nature; therefore allowing the CEO of Consumer Banking, and the COO are BOD to focus on strategies and growth the representatives of the Management opportunities and in turn, decrease inherent Committee. They meet exclusively without the conflicts of interest. attendance of the Bank’s executive officers, unless the need arises to invite one or more of them. The management committee will be responsible for setting the overall strategy as well as the financial and operational performance of the Bank. The High Lending and Investment Committee The committee’s prime mandate is to focus on References: Audit Committee.....AC The Governance and Compensation Committee.....GCC Risk Committee.....RC Management Committee.....MC High Lending and Investment Committee.....HLIC Chairman.....C the credit and investment decisions of the Bank. Member.....M 08 A N N U A L R E P O R T 2008 Review of Operations “A business is successful to the extent that it provides a product or service that contributes to happiness in all of its forms." Mihaly Csikszentmihalyi 2008 Review of Operations Institutional Banking In line with our main objective, being our clients’ business partner, Institutional Banking doubled its efforts by capitalizing on the Bank’s strong credit culture. In addition, the Bank invested significantly to provide one of the widest distribution channels across Egypt as well as a broad range of products and services to its customers. Whether working with a financial institution, a small business or a major corporation, the Institutional Banking seeks to create relationships of depth and longevity. This is achieved through catering to our customers all possible financial needs, extending specialized financing including project and structured finance as well as foreign currency management solutions. In addition, the Bank partners with corporates via equity participations and at the Appraisal and Collection... etc. CIB group same time assist all type of clients in reaching comprises the following companies: CI Capital their strategic objectives. These services are Holding, Haykala Investment Managers, provided within the parameters of managing Commercial International Life Insurance (CIL), CIB’s balance sheet to ensure matched funding, Cotecna, International Appraisal and competitive cost of funding, maximizing fee Collection Company (IACC), Egypt Factors, income and returns to our shareholders. International Security and Services Company (Falcon Group), Corplease. Catering institutional customers’ financial needs has always been the Bank’s driving force. CIB Business units falling under the Institutional through its subsidiaries, falling under the Banking, which are the major contributors to Institutional Banking, has adopted a strategy to CIB’s overall profitability, are as follows: expand its services platform via providing Corporate Banking, Financial Institutions (FI), harmonized non-banking products. CIB group SMEs, Direct Investment, Strategic Relations, of companies offer a wide spectrum of financial Treasury and Dealing Room. products and business solutions, ranging from Investment Banking, Leasing, Private Equity, Trade Support and Finance, Life Insurance, Institutional Banking Corporate Banking Group Financial Institutions Small & Medium Enterprises Direct Investments Strategic Relations Group Treasury Dealing Room Corporate Banking Group (CBG) is a major contributor to CIB’s profitability. The group offers a wide variety of products and services to cater for the requirements of corporate clients across - Structured Finance Division: the Structured For the Financial Year 2008, CBG achieved Finance Division has an unprecedented track impressive results with a loan portfolio growing record and unparalleled experience in structuring and arranging large ticket by 29% as of December over the same comparable period of the year 2007, to reach various sectors both locally and regionally. With syndicated loans, Project Finance and EGP 24.1 billion. CBG’s product knowledge, expertise and Securitization transactions. innovation, CBG tailors a broad range of CIB outperformed the market with a growth of financing solutions, from simple plain vanilla - Structured Trade Finance Division: CIB’s 24% in its loan portfolio as of November 2008 facilities to complex structures and solutions. Structured Trade Finance Division is a compared to a loan market growth rate of 13.5%. The group’s strategy has been to target pioneer in tailoring non-conventional trade CBG achieved those results on the back of its numerous sectors with large growth potential finance solutions for traders. specialized CBG team’s ability to capture a large including, but not limited to, Infrastructure, Oil volume of lending business for a large number and Gas, Power, Telecoms, Petrochemicals, - Shipping Division: The Shipping Division of projects. In addition to its underwriting capacity, Utilities, Construction, Tourism and Agribusiness. provides innovative shipping finance solutions and banking services in addition to a unique being the largest amongst Egyptian private sector banks as of December 31st 2008. Under CBG’s umbrella are the following payments service tailored for the ports. specialized divisions: “We Relentlessly Focus on Operational Superiority” CIB 2008 ANNUAL REPORT 2008 Review of Operations 39 The Structured Trade Finance division - Correspondent Banking, being the first point technical assessment and monitoring, fund continued to secure sizeable trading transactions, of contact with CIB for financial institutions, promotional activities and full reporting reaching a notable portfolio of EGP 10 billion in covers mainly: securing outgoing business services. Furthermore, it handles funds and 2008. Total Trade Finance Transactions in CBG for CIB, attracting bonding business (LGs), finance programs provided by Egyptian reached EGP 26.5 billion. CIB was thus awarded negotiation of pricing, marketing and cross- Agencies and international donors. the "Best Trade Finance Bank in Egypt" by selling. Global Finance. During 2008, FI successfully launched the micro - The International Presence was established finance/direct lending portfolio activity for the In the Shipping business, CIB maintained its to market CIB and its affiliates’ brand first time in CIB, through a service company position as the market leader in Port services. overseas along with the selling of in-house model. In addition, CIB has maintained its During 2008, the division expanded its financing structured products to Non- Resident position as the leading custodian in the local commitments to the offshore shipping business Egyptians (NREs) and high net worth market since 2000, with a share of approximately related to oil activities. In fact, an additional USD investors. Initially, this division was successful 34% of market capitalization and a customer 295m were lead arranged and financed by CIB in servicing NREs in the Gulf (mainly UAE, base of over 49,000. Moreover, Global Securities for the offshore support vessels industry (OSV) Qatar and KSA). The division plans to expand Services Division was able to attract the final as well as offshore drilling rigs. its services to reach NREs in other markets, GDR program in Egypt that was not under its both regionally and internationally. custody, thereby having 100% share of the sub CBG’s total deals closed during 2008 witnessed custodian market for GDR programs in Egypt. significant growth over the year 2007; reaching - Non-Bank Financial Institutions provides EGP 52.7 billion compared to EGP 37.5 billion in 2007. In fact, the Structured Finance team contributed to major prime deals, whereby it services, products and credit facilities to all types of FI other than banks, i.e. insurance, securities brokerage, car finance and leasing played several vital roles such as, but not limited companies. to, Mandated Lead Arranger, Egyptian Facility With regards to Small & Medium Enterprises (SME), CIB has spared no effort to serve this important segment and fulfill their needs whether for “Finance” or “Financial Advice”. In this respect the SME department provides a variety of short Agent, Underwriter, Onshore Account Bank, - Cross-Border Allocation covers syndications and medium term asset and liability products, Book-Runner, Security Agent, and Financial of financial institutions and discounts of trade mainly targeting medium size manufacturers. Advisor. The key sectors that the Structured papers related to financial institutions (banks The SME Banking department was established Finance team covered during 2008 were mainly and non-banks). Infrastructure, Commercial Real Estate, Oil and in September ’06 after laying a world class infrastructure; since then CIB has been able to Gas, Power and Agriculture. The Structured - Global Securities Services with its specialized provide EGP 1 billion in the form of committed Finance team has also played a unique role in activities has placed CIB as the leading facilities to medium size companies, and had the local market in structuring and placing Custodian Bank in the local market and the helped them grow and develop by nurturing their complex securitization structures. CIB is the only sole sub-custodian for Egyptian GDR needs for growth and expansion. Bank that structured and placed seven programs, as well as, the sole provider of securitization deals locally for non bank financial Trustee Services in the Egyptian Market. institutions, of which two were closed in the year The Direct Investment Department acts as CIB’s investment arm with respect to the Bank’s 2008. - Finance Programs and International Funds engagement in direct equity finance transactions. Corporate Banking will continue to adopt a entire banking sector. This division mainly the proper allocation of investment funds into strategy of careful expansion on a selective handles funds and finance programs provided specific industries with a proper exit scenario basis in order to enhance our strong foothold in by Egyptian Agencies and International where CIB’s return on these investments would the market and maximise profitability. Donors (e.g., USAID, European Union, World be optimally maximized. are regarded as a unique division within the The department’s main task revolves around Bank, UN, KFW, etc.), with an overall Financial Institutions Group (FIG) with its diversified approach covers areas such as: trade objective of creating sustainable During our holding period of a portfolio company, developmental funds. In addition, the division value is added by supporting the company’s finance, cross-border allocation, fundraising, offers services including, but not limited to, growth through active participation in its Board marketing products, clearing services, custody agency activities, fund administration, of Directors. In addition to maximization of services and donor programs, through its six optimum investment alternatives, synergies between the company and CIB’s other divisions and its representative office in Dubai: disbursement / repayment mechanisms, business departments. By the end of 2008, the department managed focusing mainly on liquidity; despite the fact that increase of severe competition in the local a portfolio whose size at net cost is in the range 2008’s global financial crisis had spillover effects market, CIB’s Primary Dealers Desk managed of EGP 1.9 billion (of which EGP 1.1 billion are on various financial markets, in terms of soaring to increase its secondary market Treasury Bills CIB’s subsidiaries), representing 6.2% of CIB’s credit spreads and liquidity becoming a major trading volume by more than 80% and its bond total loan portfolio size while contributing to issue. around 7% of CIB’s total profitability. The Team volume by more than 40%. CIB successfully acquired a 37% market share in the primary also achieved an IRR in the range of 30% on CIB’s foreign currency liquidity position during market in Treasury Bills and a market share of exits during the last 2 years. 2008 remained solid and was not negatively 33% in the secondary market Treasury Bonds CIB is considered the premier Bank in Egypt with regards to the establishment of a Strategic Relations Group (SRG). In today’s competitive market, the quality of services provided to clients impacted with the events that took place towards trading. Moreover, CIB was the first local Bank the year end. Liquidity ratio was maintained at to execute a Repo deal for Treasury Bonds a level above 29.96%, against a regulatory level worth of EGP 2 billion. of 25%. Our strong performance is a reflection to the quality of service and the clients’ CIB assisted clients in successfully managing is key to the success of any bank. With that confidence in CIB, whereby we have a their risk exposures to minimize the impact of being the fundamental platform for its activities, competitive edge, as client deposits represents the Credit Crunch’s Volatility on the Business. the SRG is dedicated to cater to, and nurture 99% of total CIB funding. CIB’s relationship with its major Institutional Based on the Clients’ Risk appetite, hedging strategies were provided to suit the clients’ depositors, whose deposits contribute Treasury managed the interest rate risk within needs. On the Local Market, CIB provided the substantially to CIB’s stable funding. prudent levels to maximize the Bank’s profitability. clients with immediate competitive pricing on In addition, the Treasury continued to diversify the Egyptian Debt, especially at the time of SRG focuses on over 180 strategic clients, its proprietary investments benefiting from the illiquidity. representing the most reputable and renowned proper interest rate outlook. worldwide and local Donor Agencies and NGOs, For the eighth consecutive year, CIB won the as well as the vast majority of Diplomatic The results of these efforts were rewarding as Global Finance Award for the Best Foreign Missions working in Egypt. Through the in-depth December YTD 2008 net interest income grew Exchange Bank in Egypt. The award knowledge of the nature of its clients’ business, by 51% compared to YTD December 2007. acknowledged the market’s appreciation of CIB’s the department takes pride in offering innovative, Additionally, Net interest margin YTD December pioneer role in providing tight and competitive tailor-made products and services to meet the 2008 was 4.06%- being the highest among market making quotes for banks, corporations unique individual needs of its clientele base. Banks operating in Egypt- compared to 3.27% and retail clients. These products serve to facilitate the clients’ YTD December 2007. business operations as well as their banking requirements. The Dealing Room at CIB has always been a major contributor to the Bank’s profits, its The success of this department as a function is reputation and marketing outlook. The FX based on the partnership that it has nurtured operations covers spots, forwards, swaps, with its clients over the years. SRG is committed options (plain vanilla, exotic OTC products), to continue strengthening this partnership, while cash export and imports, structured products, maintaining the delicate balance between client FX linked yield enhancement products, limit satisfaction and account profitability. orders and hedging and investment advisory. The Treasury Department’s mission is to efficiently manage the Bank’s assets and Besides round the clock FX executions (including Fridays and national vacations), complementary daily market commentary and regular mobile liabilities through continuous assessment of phone SMS alerts covering CIB’s clients’ market risk on the balance sheet. This includes requests. liquidity and interest rate risks, along with maximizing the Bank’s net interest income and During 2008 the team made a significant upward introducing mutual funds’ line of business to shift in its trading volumes reaching an equivalent clients. of EGP 300 billion through the year, compared This year, Treasury achieved its mission by to EGP 200 billion a year earlier. Despite the “We Deliver an Exceptional Customer Experience” CIB 2008 ANNUAL REPORT 2008 Review of Operations 41 Consumer Banking Business Profile CIB has commenced on the key journey of transition from running a Retail Banking arm to a full-fledged world-class Consumer Banking franchise. This entails completing the menu of Consumer product propositions, building management strength and depth and raising the bar on quality standards to ensure seamless end-to-end customer experiences. Completing the Menu CIB has built up over the last decade leading market positions in several key Retail Banking businesses including Consumer Liabilities, Credit / Debit Cards and Mortgage Loans. This has been built on the foundation of the largest Branch Banking Network amongst private sector banks – now standing at 152 branches / units after adding 21 new branches / units in 2008. In addition to being the largest private sector Bank in terms of ATM network – now at 472 ATMs after adding 37 ATMs in 2008. CIB has continued its deep penetration into the Consumer market in 2008 by adding substantially to its customer liabilities base. CIB also runs a Personal Loans business focusing on employees of Corporate Bank companies and offered fully secured Overdrafts and Trade Products. CIB is also active in the local market Investment products through its subsidiary CIAM including Osoul, Aman, and Estethmar funds targeting varying risk profiles and managing assets of EGP 4,897 million. Finally, the sister company CIL offers customers a wide range of Saving and Insurance programs. 2008 Accomplishments The CIB Menu has been expanding over the years. In line with such commitment some new products and services were introduced in 2007 and 2008 in the Egyptian market, such as: 1. Cards Acquiring Business. CIB stormed into this market in August 2007 and has experienced an unprecedented rise to 21% market share within 15 months. 2. CIB Wealth Management was launched in support functions with business functions September 2008 in four pilot locations and to operate smoothly. As a result of the focusing on providing full range of saving, aforementioned trust and investment investment and insurance propositions to allocated to the Consumer Banking, its the affluent market with both on-shore and contribution to CIB’s net income grew off-shore products. significantly over the last couple of years. 3. CIB Auto Loans has been launched in December 2008 and is geared up to Quality Standards CIB is committed to quality as its single most aggressively capture considerable share of important source of strategic and sustainable this growing market in 2009. differentiation. This is being translated in all areas of the business with investments in building 4. Expanding the CIB Personal Loans world-class standards and benchmarks for proper program beyond employees of Corporate and timely completion of all process steps. The Bank companies will allow CIB to expand management team is keen on measuring aggressively in this product with the right performance in all areas, in order to constantly revenue – risk trade-offs. improve the customer experience. This continuous process of quality improvement is 5. Residential Property Finance (RPF) CIB’s the pathway for CIB to attain ultimate customer Residential Property Finance has satisfaction and loyalty. successfully penetrated the Egyptian Real Estate Finance market, gaining a solid The examples of this strategic intent are plentiful. market position and establishing itself as a CIB has moved in 2008 to centralize all credit leading provider of Residential Property decisions and collections functions for all Finance services. RPF products are Consumer Asset products. This ensures designed to cater for home finance needs standardized treatment in an assembly line of a variety of customer profiles; including environment thus applying the Bank policies on employed, self employed and professionals, all customers. in addition to financing both resident foreigners and non-resident Egyptians. CIB is also strategically aligned to shifting customer service from the traditional brick-and- 6. Management: CIB has engaged heavily in mortar channel to alternative electronic channels. active strategic recruitment starting in 2007 This leads to multiple benefits including and intensifying in 2008. This was intended convenient customer access, standardization of to bring into the CIB management team the service offering and customer protection individuals with strong leadership skills and against potential fraud. Overall, the message is experience in Consumer Bank management one of quality service delivery. Today, CIB offers of banks around the world and thus closing customers the following alternative channels of skill gaps. The marriage of such solid customer interaction: ATMs, Internet Banking, multinational expertise with the strong brand Call Center, IVR (Integrated Voice Response) image and distribution of CIB is the secret systems, SMS, and e-mail. recipe for the future success of CIB Consumer Bank. CIB welcomed in 2008 our Ongoing Consumer Banking Strategy new CEO-Regional Consumer Banking. Egypt is still significantly under-banked, CIB has also been hiring aggressively in especially, in terms of low penetration of several middle management positions to Consumer Bank products, whereby CIB is prepare the next line of Consumer Bank heavily focusing in the upcoming period. As senior management. Significant re- the economic development continues, more structuring has occurred to better align Egyptians will come into the category of Consumer Banking. CIB aims to build the continue to implement changes to our product experience and unparalleled market knowledge, management team that can position us as the mix allowing us to maintain and further enhance combined with the resources: Human, Bank of Choice offering the full range of our leadership in the market. technology, available at our disposal and above Consumer products. all else, familiarity with an excellent knowledge The coming year is set to witness the business of our customers and their needs, to formulate In order to maintain our established status within transformation of CIB’s product offering, and a winning formula for continued success and the market in light of the strong competition, we service model, with our dedicated team of leadership in Egypt. aim to continuously improve and develop our specialists spread throughout our branch network loans and deposits products in response to our ready to assist our customers and make their customers’ evolving financing needs. It is with experience a more rewarding one. this in mind; that we have introduced and will We will continue to draw upon our solid “Business Partners Model” Support Functions In 2008, CIB rolled out a strategy to relook and restructure all support areas in the Bank based on international best practices. Accordingly, significant improvements in communication and internal processes have been realized to create a solid platform that would stand the Bank’s growth strategies. In this regard, all support functions were grouped under one area which required the recruitment of an international and highly skilled Chief Operations Officer (COO). In effect, later in 2008, the best in class COO was hired from international market with leadership experience in Europe, Latin America, Asia Pacific, Middle East, and Africa. Aiming at realizing this new strategy numerous forums were created to increase interaction between the support functions and the businesses to improve communication, foster team spirit and prioritize the various projects in the Bank. Currently, this area comprises of Human Resource, Finance, Corporate Services, Operations, Information Technology, Premises Department, and Marketing & Communication. 2008 Accomplishments Administration Departments have been combined and renamed Corporate Services. Also efforts are being made to provide the best service to clients through a careful evaluation of services, outsourcing versus in house decisions and out of the box ideas to optimize the resources being allocated for the different services. Finance Department has been restructured on international standards. The department in its new shape will better provide effective management information for decision making and performance analysis. In addition, robust accounting and taxation unit is more capable of providing timely and accurate information to internal and external stakeholders based on the rules and regulations applicable in Egypt. Moreover, the scope of the payment and reconciliation departments has been enhanced to strengthen the control environment. Premises Department has been working on optimizing the space utilization for Head Office Staff as well as opening and renovating branches across Egypt. This year 17 branches, four units and 1 foreign exchange branch have been opened. In addition 4 wealth management centers have become operational and 4 branches have been renovated. In addition, a number of departments have been moved to Smart Village as part of the overall premises plan of CIB. Human Resources has been providing the best professional services to attract, develop, and retain a motivated and diverse workforce. In order to ensure the successful delivery of CIB Business Plans & Growth Aspirations, we have succeeded to create a supportive work environment. The department has also been focusing on providing a full range of personnel services to all CIB employees. This requires the implementation of up-to-date trends in the field, as well as, recommending new benefits, while enhancing already existing policies, with the objective of maintaining and retaining CIB’s most vital asset “our staff”. In 2008 a number of steps were taken for development of the staff’s skills and enhancing the culture of performance versus reward, this includes the following: - Ongoing improvements in the structure of the compensation packages, as well as job allowances for different departments. - Approximately 1000 new employees were hired in different areas of the Bank based on the requirements of the business (primarily in the consumer banking business). - 2896 staff was trained for 120,827 man hours in 2008 in various training schemes. - An enhanced Performance Management Process was launched, which ensures direct links between objective setting and delivering Value to the Business and more attention to CIB Core Values in all of our dealings. CIB continued its investment in Information Technology, aiming at enhancing the quality of services being provided to our customers. The focus has been on the continous improvements to the technical infrastructure of the Bank, in line with our strategy and goals. CIB 2008 ANNUAL REPORT 2008 Review of Operations 43 Efforts and investments are being exerted to enhance our core system as well as upgrading technologies in our customer contact points. A number of initiatives have been taken in 2008 in this regard, these include: - Implementation of a new web site for the Bank as well as working towards the extension of CIB’s online banking capabilities. - Increase the efficiency and connectivity of our branch and ATM network. - Further enhancing E-Security, aiding CIB's initiative to be the first Bank in Egypt abiding by the Electronic Signature law. - Continuing the expansion of our ATM network and functionality: with 37 new ATM installations during the year A number of initiatives are undertaken in Central operations to improve productivity of staff involved in processing customer transactions. There has also been an effort to centralize operational activities from the branches to Central Operations to bring economies of scale, better controls and allow the branches to have more time for sales and service for customers. Marketing & Communication has been working on two aspects, which are: - To enhance the CIB Brand within and outside Egypt as well as focusing on product based marketing to fulfill the requirements of the business. - To carry out internal events to foster team work in the organization, increase staff motivation and loyalty to CIB. On the whole, the shift in strategy and restructure in the support functions have laid a solid foundation to support the business growth in the coming years. The focus will continue on business partnership, improving productivity from existing resources, process reengineering to avoid duplications and work on innovative ideas to reduce the cost per transaction in the Bank. Risk Management At CIB, we seek to achieve an appropriate risk-reward balance, and continue to build and enhance the risk management capabilities that will assist in delivering our growth plans in a well controlled environment. Our main strategic priority is to seize a top of The approval chain also entails risk assessment Board’s directions. The guide defines the broad the line Risk Management system, not only for team to review any loan application prior policies and limits for consumer lending activities, the purpose of Data Management pertaining to Basel II compliance purposes, but also for presenting to any of the approving bodies. In fact, within that task, thorough analysis is in addition to, setting guidelines for implementation. Moreover, a Consumer Risk Portfolio Management as well as the upgrade conducted for credit approvals in order to ensure Committee that reports to the Board Risk of the Management Information System and that they meet the Bank’s risk standards. The Committee was established. In 2009, the strategy Risk Analysis. Risk Management Team has historically is to move towards further enhancement and Credit Risk Institutional Banking CIB’s Institutional Banking Risk Management experienced various business cycles; and has automation of its underwriting procedures, become capable of ensuring presentation of automated collections and recovery processes. prudent projections and analysis. Aggregate Portfolio Quality and Provisioning The Bank’s prudent Risk Rating and Provisioning bears imperative responsibility for monitoring One of the primary goals of CIB’s Risk the quality of the loan portfolio by pursuing Management is to monitor problem loans at an Policy have enabled CIB to build up substantial stringent measures. The department is in charge early stage before they develop into Non- provisions against possible loan losses. Total of setting prudent risk management policies, Performing Loans. Furthermore, convert the Loan Loss provisions reached EGP 1.61 billion procedures and guidelines that conform to the maximum possible amounts to higher credit in December 2008, compared to EGP 1.26 billion Bank’s rigorous risk practices embodied in our quality brackets whenever possible. The in 2007, despite the write off of EGP 96 million Credit Policy Guide (CPG). Our CPG, the guiding Department also determines the optimal recovery in 2008, compared to EGP 177.8 million in 2007. principle of our lending and provisioning scheme, prospects that can be achieved from the is well within the standards and requirements accounts and constantly strives to maximize the Due to CIB’s ability to restructure a significant applied by the Central Bank of Egypt’s (CBE). recovery rates. The department also ensures compliance with all CBE regulations and directives. Consumer Bank Risk Management Unit In line with CIB ambitious plans for expanding amount of Non-Performing Loans, the Bank has improved its General Ratio for Direct Exposure to 3.42% as of December 2008, up from 3.37% in 2007. One of CIB’s key strength is typified in our its Consumer Banking business, the Bank is prominent credit culture, thanks to the Bank’s in-house credit training program9. All officers and analysts must be certified by this program, devoted to ensure that solid risk management The Department continues to make valuable infrastructure, policies and tools are in place. In contributions to the Bank’s performance with 2008, the Bank has set up an independent aggregate Recoveries of EGP 314.9 million as leading to the creation of a unified culture where Consumer Risk unit under its overall Risk of December 2008, up from EGP 251.2 million everyone speaks the same business language. Management umbrella to effectively manage in 2007. Consequently, it helped in forming a smooth the Consumer Credit Cycle. Consequently, and speedy approval process, which is another policies, product programs, centralized vital asset CIB possesses. Over the years, the underwriting, portfolio monitoring, collections Bank has completely institutionalized the credit and recovery functions were essential. decisions to be made only through a hierarchy of committees, within their regular weekly In this respect, several key initiatives were meetings. In addition, the bank has lately undertaken, among which was; the development separated between the Bank’s overall strategic decisions and higher end exposure approval10. of a Consumer Policy Guide in line with the 9 Founded in the 70’s by Chase Manhattan Bank based on its credit module. 10 Kindly refer to the Corporate Governance section for more details “We Grow While Preserving our Supreme Quality” CIB 2008 ANNUAL REPORT RISK MANAGEMENT 45 2005 2006 2007 2008 Gross Loans (000's of EGP) 14,988,037 18,503,584 21,465,494 27,738,625 NPL (%of loans) 5.6% Charge Offs to Date (000's of EGP) 1,041,294 Recoveries to Date (000's of EGP) 106,680 General Ratio (Direct Exposure only) 2.7% Recoveries to Date / Charge-offs to Date 10.2% 3.8% 1,269,741 206,742 2.8% 16.3% 3.0% 1,447,577 251,214 3.37% 17.4% 3.0% 1,543,638 314,974 3.42% 20.4% Basel II Grounding In line with the Bank’s efforts to comply with the Basel II Accord, the Bank has a Statistical Rating Model developed to estimate the PD (Probability of Default) risk component for every obligor Market Risk Management (MRM) Despite the Bank historical possession of Operational Risk Management As part of Operation Risk, the Bank has relatively small trading equities, FOREX and developed an internal control mechanism interest rates positions, a specialized team has whereby the Risk Management department can been assigned to monitor the Bank’s market identify daily Operational Risk events. In addition, within the Corporate Asset Class. This is also implemented in line with the Foundation Internal risk. a number of techniques are applied to efficiently manage Operational Risk in our business by Rating Based Approach. The model is being used on an annual basis to rate the entire Loan Book. In addition, the Bank is developing the other two risk components for the Corporate Asset Class namely; LGD (Loss Given Default) and EAD (Exposure at Default) in order to ultimately adapt the Advanced IRB Approach. The Bank utilizes an expert scoring model for the SME (Small and Medium Enterprises) portfolio. It is currently being used to score the SME portfolio on an annual basis. The model will be subsequently validated and calibrated into a PD model once the portfolio reaches a certain size. Through various techniques the MRM team is performing bottom-up self assessment in charge of quantifying and modeling the techniques to capture and monitor key Expected Loss that may arise from adverse Operational Risk indicators. movements in FOREX, Equities and Interest Rates. These techniques include Value-at-Risk, CIB is in process of setting up plan for Crisis Stress Testing, Scenario Analysis and Economic Management and Business Continuity Value of Equity. All the above techniques are Planning/Disaster Recovery Planning Risk. regularly conducted to ensure the adequacy and solvency of the Bank financial position from the Market Risk perspective. The conclusion of the aforementioned tests has consistently proved the soundness of the Bank’s equity cushion and its well diversified risk profile. Compliance Established in March 2007, Compliance acts as an independent function to protect the Bank against any potential Regulatory, Reputation, Money Laundering and Fraud Risks. It is comprised of three divisions: Compliance with Policies and Procedures: Aligns with all lines of businesses to ensure that CIB conducts business together with compliance based on existing local regulations as well as international best practices. Compliance with Anti Money Laundering: Responsible for ensuring proper client due diligence through the Know Your Client concept. CIB is currently in the process of implementing a full automated AML solution that covers monitoring all Bank transactions. During 2008, a new swift filtration system along with a full World Check List installation has been implemented to enhance transaction checking against sanctions and embargoes. An amended AML and KYC policies have been compiled to align with CBE requirements in this respect. Corporate Governance and Code of Conduct: Responsible for ensuring that the Bank Complies with the adopted Corporate Governance Code. In addition, Code of Conduct Compliance remains to be the key for all CIB Board members and Management. Ongoing staff awareness sessions are also being conducted in this respect. The “Whistle Blowing” concept has been introduced to Bank employees to encourage them to speak up when identifying misconduct, violations, fraud or breaches. Exercising full independence, the Chief Compliance Officer presents a quarterly report to the Audit Committee of the Board together with the recommendations of corrective measures to cover identified weaknesses and violations. “A Pioneer in Setting Standards” CIB 2008 ANNUAL REPORT COMPLIANCE 47 “People with clear, written goals, accomplish far more in a shorter period of time than people without them could ever imagine.” Brian Tracy 08 A N N U A L R E P O R T Strategic Subsidiaries and Affiliates The Client’s and the Lender’s requirements are of key concern, where CTS studies and considers carefully each case, to offer suitable services. 2008 Accomplishments By the end of 2008, the Company had more than USD 30 million value of goods under management which is almost double the value managed during 2007, including soft commodities, livestock, vehicles, grain, sugar and others. International Appraisal and Collection Company Profile IACC was established in 2007 as an Egyptian joint stock company. CIB is the largest shareholder, with 40% stake of the company’s capital, while the National Bank of Egypt owns 20%, CIB Social Insurance funds 16% and the residual is divided among various investors. IACC specializes in the evaluation of real estate and movable assets, including, but not limited to, the machines, equipments, ships, touristic villages, vehicles and products. The company also conducts inquiries and field investigations on the individuals and companies, in addition to debt collection. Moreover, the company performs the ownership research procedures for real estate and movable assets, as well as, providing assistance in legalizing in kind rights (registration and mortgaging of lands and buildings) and incorporation of companies. In addition, IACC sells real estate and movable assets through public auctions or closed proposals. 2008 Accomplishments - Offering inspection and damage evaluation services - IACC was recognized by the CBE as one of the recommended experts in collateral evaluation Egypt Factors Profile Egypt Factors (EGF) is the first factoring company in Egypt, with an authorized capital of USD 15 million and paid-in capital of USD 5 million. EGF is a joint venture between CIB and the Maltese based bank FIMBank, where each have a 40% equity share, as well as the IFC, holding 20% equity stake. Product Type EGF focuses on supporting domestic and international trade, through providing the companies that conduct transactions on an open account deferred payment basis, with a wide range of services. These include: domestic factoring, import factoring, export factoring and purchase factoring. The factoring package involves administration and collection of accounts receivables, protection against the default of the buyers and immediate funding. Target Market The company targets all producers, traders, and service providers conducting transactions based on short term deferred payments. For large corporations, factoring is advantageous, since it protects them and improves their efficiency and financial ratios. However, factoring is still considered more beneficial to the SMEs, in terms of liquidity and growth. 2008 Accomplishments - Export Factoring was officially launched in November 2008 through the “Egypt Trade & Export Finance Forum”. - Announcing the initiation of Domestic Factoring. “The most important single ingredient in the formula of success is knowing how to get along with people.” Theodore Roosevelt 08 A N N U A L R E P O R T Corporate Social Responsibility Corporate Social Responsibility Being committed to the community where we live as well as our work environment, corporate social responsibility plays a fundamental part of the way we conduct business at CIB. Our business nature has an effect on our environment and on the lives of millions of people across Egypt. Hence, we possess a unique approach for CSR, which highlights six key areas where we have a significant impact on. 1) Committed to Taking Every Reasonable Step to Ensure the Health and Safety of our Community CIB is also recognized as a significant preservation of natural resources as well as collector of Egyptian art. the public commitment to Human Rights which recognized CIB by Realizing Rights Providing direct financial contributions to Our Employees and the Community The and Business & Human Rights Resource Children’s Cancer Hospital 57357 as well Bank provides its staff with the necessary Centre. as donations to Cairo University Pediatrics resources in terms of funding and training, Hospital (Abu El Reesh Hospital – Public in order to make a positive contribution within 4) Achieving Employee Satisfaction Hospital) the community. 2) Contributing to our Community Sponsorships and Social Involvement 3) Being Environmentally Responsible Funds Directed to Social Development In 2008, we employed 914 people across the Bank and aim to be the employer of choice. We believe that the comfort and the skilled development of our employees are CIB’s financial sponsorships and donations CIB has a specialized division which handles essential to our growth and success. The are focused on projects that help development funds and finance programs employee satisfaction survey that was communities achieve their goals; like Misr provided by governmental and international conducted during 2008 showed outstanding El-Khair Foundation and Yehia Arafa donors. These funds are known for their low results compared to the four surveys that Children’s Charity Foundation (Private Sector interest rates and simple application were previously conducted Organization that provides financial support procedures. The program aims to create (See Figure below) or public hospitals within Cairo). new job opportunities and higher income amongst rural populations with special The Egyptian Food Bank The first non- emphasis on women and small farmers. governmental organization overcoming Moreover, CIB is engaged in environmental hunger in Egypt, through accepting monetary friendly projects designed for the and moral support from different organizations and individuals to supply appropriate food to the truly needy on a continuous basis. Art Sponsorship CIB regularly sponsors art galleries organized by the Ministry of culture, with the aim of encouraging painters on different levels and their apprenticeship. 9 8 7 6 5 4 3 2 1 0 8.5 First Survey Second Survey Third Survey Fourth Survey Fifth Survey 2008 Average Satisfaction Score “Serving All-Embracing Communities” CIB 2008 ANNUAL REPORT CORPORATE SOCIAL RESPONSIBILITY 59 5) A Fascinating Customer Experience Our customer service distinguishes us from our competitors. Our objective is to provide best in class levels of service, in fact, this is what we have been working on since the year 2007 that will earn us customer trust and loyalty. 6) Meeting our Shareholders Expectations We encourage a two-way dialogue with existing and potential investors and business commentators. We understand the worth of transparency and integrity; and hence according to that conviction we do our business, which creates a better understanding of our institution and better business relationships. “Some of us will do our jobs well and some will not, but we will be judged by only one thing, the result.” Vince Lombardi A N N U A L 08 Financial Statements R E P O R T Financial Statement A. CIB Stand-alone CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 63 Financial Statement A. CIB Stand-alone Commercial International Bank (Egypt) S.A.E. Balance Sheet Unconsolidated as of Dec. 31, 2008 Assets - Cash & Due From Central Bank - Due From Banks - Treasury Bills and other Governmental Notes - Trading Financial Assets - Loans & Overdrafts - Financial Derivatives - Financial Investments: Available for Sale Held to Maturity - Financial Investments in Subsidiary and Associated Co. - Debit Balances & Other Assets - Deferred Tax - Fixed Assets (Net) - Total Assets Liabilities & Shareholder's Equity Liabilities - Due to Banks - Customers Deposits - Financial Derivatives - Dividends & Profit Sharing - Credit Balances & Other Liabilities - Long Term Loans - Other Provisions - Total Liabilities Shareholders' Equity - Issued & Paid - in Capital - Reserves - Reserve for employee stock ownership plan (ESOP) - Retained Earning - Total Shareholders' Equity - Net Profit of the year - Total Shareholders' Equity & Net Profit - Total Liabilities & Shareholders' Equity Note No. Dec. 31, 2008 EGP (4) (5) (6) (7) 6,493,358,437 4,391,051,249 12,449,007,406 497,554,487 (10&11) 26,330,327,878 (12) (8) (8) (13) (15) (16) (17) (18) (12) (19) (20) (21) (22) (22) (30) 704,890,792 2,762,232,983 681,263,274 1,138,332,672 942,621,482 21,840,568 715,251,587 57,127,732,815 213,470,012 48,938,109,663 636,914,744 - 1,194,593,545 109,273,933 363,218,186 51,455,580,083 2,925,000,000 1,033,696,029 86,727,903 11,628,342 4,057,052,274 1,615,100,458 5,672,152,732 57,127,732,815 Dec. 31, 2007 EGP (Restated) 4,953,205,430 13,782,062,043 2,948,674,319 588,473,270 20,478,590,841 75,307,833 2,347,587,666 443,894,166 365,723,936 1,020,565,573 52,819,475 607,104,820 47,664,009,372 2,377,082,435 39,514,539,992 63,166,763 336,727,470 735,103,795 161,356,219 395,332,813 43,583,309,487 1,950,000,000 2,089,911,959 29,159,584 11,628,342 4,080,699,885 - 4,080,699,885 47,664,009,372 - Contingent Liabilities & Commitments (23) 13,290,994,705 11,559,866,680 The Accompanying Notes are an integral part of the Financial Statements and are to be read therewith " Audit Report Attached ". CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 65 Dec. 31, 2007 EGP (Restated) 2,993,373,614 (1,796,702,031) 1,196,671,583 547,669,248 (25,286,540) 522,382,708 66,158,925 276,191,855 (250,416,667) 226,135,001 (636,363,618) 181,676 1,400,941,463 (180,303,950) 12,186,756 1,232,824,269 3.73 3.71 Commercial International Bank (Egypt) S.A.E. Income Statement Unconsolidated For Year Ended Dec. 31, 2008 Note No. Dec. 31, 2008 - Interest and similar income - Interest and similar Expenses Net Interest Income - Fees & Commissions Income - Fees & Commissions Expense Net Income From Fees & Commissions - Dividends Income - Net Trading Income - Provisions - Profit (Losses) from Financial Investments - Administrative Expenses - Other Operating Income Net Profit Before Tax - Income Tax - Deferred Tax Net Profit After Tax - Earning Per Share - Basic Diluted EGP 3,772,875,880 (1,963,661,240) 1,809,214,640 686,456,733 (73,587,145) 612,869,588 141,572,634 337,579,386 (394,545,539) 115,831,055 (949,681,007) 183,048,413 1,855,889,170 (209,809,805) (30,978,907) 1,615,100,458 4.89 4.84 (24) (24) (25) (11&21) (8) (9) (28) (27) (29) (29) Commercial International Bank (Egypt) S.A.E. Cash flow Unconsolidated For Year Ended Dec. 31, 2008 Cash Flow From Operating Activities - Net Income before tax Adjustments To Reconcile Net Income To Net Cash Provided by operating activities - Depreciation - Provisions (Formed during the year) - Trading financial investments evaluation differences - Impairment of assets - Utilization of Provisions (Except Provision for Doubtful Debts) - Provisions No Longer required - FCY Revaluation Differences of Provisions Balances (Except Doubtful Debts) - Gains From Selling Fixed Assets - Profit From Selling Financial Investments - Profits From Selling an Investment in Subsidiary - FCY Revaluation Diff.of Long Term Loans - Share based payments Operating Profits Before Changes in- Operating Assets & Liabilities Net Decrease (Increase) in Assets - Due From Banks - Treasury Bills and Other governmental Notes - Trading Financial Assets - Financial Derivatives (Net) - Loans & Overdrafts - Debit Balances & Other Assets Net Increase (Decrease) In Liabilities - Due to Banks - Customers Deposits - Credit Balances & Other Liabilities - Income tax paid Net Cash Provided from Operating Activities Dec. 31, 2008 EGP Dec. 31, 2007 EGP (Restated) 1,855,889,170 1,400,941,463 153,818,325 394,545,539 87,784,923 54,837,345 (10,943,385) (165,365,215) 516,745 (5,052,568) (219,181,953) (50,258,991) (922,993) 57,568,319 120,918,839 250,416,667 (7,680,871) (4,185,378) - (7,036,600) (1,904,981) (1,269,870) (174,061,817) (148,393,558) 1,733,674 29,159,584 2,153,235,261 1,458,637,152 9,567,610,757 (7,353,852,038) 3,133,860 (55,834,978) (6,220,116,065) (13,465,835) (2,163,612,423) 9,423,569,671 418,646,064 (155,475,345) 5,603,838,929 (7,960,703,701) 2,266,818,190 306,349,739 (12,141,070) (3,054,288,046) (199,356,212) 1,164,558,315 7,914,312,794 (150,080,573) (80,317,367) 1,653,789,221 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 67 Dec. 31, 2007 EGP (Restated) 107,524,396 (278,980,037) - 378,390,172 1,121,812,258 1,328,746,789 60,455,684 (287,235,147) (226,779,463) 2,755,756,547 4,023,396,001 6,779,152,548 4,953,205,430 13,782,062,043 2,948,674,319 (13,264,218,534) (1,640,570,710) Commercial International Bank (Egypt) S.A.E. Cash flow Unconsolidated For Year Ended Dec. 31, 2008 Cash Flow From Investing Activities - Sale (Purchase) Of Subsidiaries & Associated Companies - Purchase of Fixed Assets , Premises and Fitting- out of Branches - Redemption Of Held to Maturity Financial Investments - Held to Maturity Financial Investment purchases - Available For Sale Financial Investment Net Cash (used in) Provided from Investing Activities Cash Flow From Financing Activities - Increase (Decrease) in Long - Term Loans - Dividends Paid Net Cash (Used in) Financing Activities Net Cash & Cash Equivalent Changes - Beginning Balance of Cash & Cash Equivalent Cash & Cash Equivalent Balance At the End of the year Cash & Cash Equivalent are Represented as Follows : - Cash and Due from Central Bank - Due from Banks - Treasury Bills and Other Governmental Notes - Due from Banks (Time Deposits) - Treasury Bills with maturity more than three months Dec. 31, 2008 EGP (772,608,736) (142,698,585) 276,189,303 (513,558,411) (200,041,718) (1,352,718,147) (51,159,293) (336,727,470) (387,886,763) 3,863,234,019 6,779,152,548 10,642,386,567 6,493,358,437 4,391,051,249 12,449,007,406 (3,696,607,777) (8,994,422,748) Total Cash & Cash Equivalent 10,642,386,567 6,779,152,548 l a t o T P G E 3 4 3 , 2 8 8 , 9 3 0 , 3 5 8 9 , 1 6 5 , 2 4 1 8 2 3 , 4 4 4 , 2 8 1 , 3 - - ) 0 7 4 , 7 2 7 , 6 3 3 ( ) 6 2 8 , 0 0 0 , 7 2 ( 9 6 2 , 4 2 8 , 2 3 2 , 1 - - - - - - - - 4 8 5 , 9 5 1 , 9 2 4 8 5 , 9 5 1 , 9 2 5 8 8 , 9 9 6 , 0 8 0 , 4 4 8 5 , 9 5 1 , 9 2 - - P G E P G E - - - 7 5 3 , 4 0 9 , 7 8 , 9 1 9 1 4 0 3 6 1 , 9 6 2 , 4 2 8 , 2 3 2 , 1 ) 2 9 4 , 1 1 4 ( ) 7 0 3 , 5 8 6 , 5 9 8 ( ) 0 7 4 , 7 2 7 , 6 3 3 ( - - - - ) 6 2 8 , 0 0 0 , 7 2 ( - - 1 3 5 , 3 0 9 , 0 6 , 6 9 3 7 6 5 0 5 , - - - - - - - - - - , 5 1 3 9 0 6 3 1 2 , , 2 4 3 8 2 6 1 1 , , 6 4 2 4 8 7 1 6 , , ) 4 0 9 5 5 1 0 5 ( , , 4 3 9 2 8 4 8 4 5 , , 2 7 8 0 3 2 1 7 3 , 0 0 0 , 0 0 0 , 0 5 9 , 1 s t n e m t s u d A j r e t f l A e c n a a B g n n n g e B i i - - - - - - - - - - , 8 6 6 4 6 0 4 3 8 , , 9 3 6 0 2 6 1 6 , - - - - - - * * ) P O S E i l ( n a p p h s r e n w O k c o S s e e y o p m E t l r o F e v r e s e R r a e Y e h T f o s t i f o r P t e N d e t s u d A j e v r e s e R f o t r a P e g a s U d r a d n a t S g n i t n u o c c A s e v r e s e R o t r e f s n a r T g n i t s u d A j f o t c e f f E i d a P s d n e d v D i i , 2 0 6 7 4 5 2 8 3 1 , , , 1 1 5 1 5 8 2 3 4 , 0 0 0 , 0 0 0 , 0 5 9 , 1 r a e Y e h T f o d n E e h T t a e c n a l a B P G E 4 3 6 , 8 5 4 , 7 P G E P G E P G E P G E P G E , 3 0 9 9 0 7 2 6 1 , - , 4 3 9 2 8 4 8 4 5 , , 2 7 8 0 3 2 1 7 3 , 0 0 0 , 0 0 0 , 0 5 9 , 1 r a e Y e h T i f o g n n n g e B i t a e c n a a B l 3 2 7 , 5 4 4 , 0 8 6 1 0 2 3 3 , , 6 4 2 4 8 7 1 6 , - - - s d r a d n a t S g n i t n u o c c A g n i t s u d A j f o t c e f f E ) P O S E ( n a l p r a e Y e h t f o s t i f o r P . f f i D n o i t a u l a v e R e v r e s e R l i a c e p S i * g n n r a E d e n a t e R i e v r e s e R l a r e n e G e v r e s e R l a g e L l a t i p a C 7 0 0 2 i p h s r e n w o k c o t s * s t n e m t s e v n i . S F A . l e e y o p m e r o f e v r e s e R r o f e v r e s e R 8 0 0 2 , 1 3 . c e D f o s a d e t a d i l o s n o c n U y t i u q E ' l s r e d o h e r a h S n i s e g n a h C f o t n e m e t a t S . . E A S . ) t p y g E ( k n a B l a n o i t a n r e t n I l i a c r e m m o C l e e y o p m e r o f e v r e s e R r o f e v r e s e R i p h s r e n w o k c o t s * s t n e m t s e v n i . S F A . l a t o T P G E P G E P G E P G E P G E P G E P G E P G E P G E ) P O S E ( n a l p r a e Y e h t f o s t i f o r P . f f i D n o i t a u l a v e R e v r e s e R l i a c e p S i * g n n r a E d e n a t e R i e v r e s e R l a r e n e G e v r e s e R l a g e L l a t i p a C 8 0 0 2 5 8 8 , 9 9 6 , 0 8 0 , 4 4 8 5 , 9 5 1 , 9 2 - 1 3 5 , 3 0 9 , 0 6 , 5 1 3 9 0 6 3 1 2 , , 2 4 3 8 2 6 1 1 , , 2 0 6 7 4 5 2 8 3 1 , , , 1 1 5 1 5 8 2 3 4 , 0 0 0 , 0 0 0 , 0 5 9 , 1 r a e y e h T i f o g n n n g e B i t a e c n a a B l 8 5 4 , 0 0 1 , 5 1 6 , 1 - ) 0 3 9 , 5 1 2 , 1 8 ( - - - 9 1 3 , 8 6 5 , 7 5 9 1 3 , 8 6 5 , 7 5 - - - 8 5 4 , 0 0 1 , 5 1 6 , 1 - - - ) 0 3 9 , 5 1 2 , 1 8 ( - - - - - - - - , ) 0 0 0 0 0 0 5 7 9 ( , - - - - 2 3 7 , 2 5 1 , 2 7 6 , 5 3 0 9 , 7 2 7 , 6 8 8 5 4 , 0 0 1 , 5 1 6 , 1 ) 9 9 3 , 2 1 3 , 0 2 ( , 5 1 3 9 0 6 3 1 2 , , 2 4 3 8 2 6 1 1 , , 2 0 6 7 4 5 7 0 4 , , 1 1 5 1 5 8 2 3 4 , - - - 0 0 0 , 0 0 0 , 5 7 9 0 0 0 , 0 0 0 , 5 2 9 , 2 k c o t S s e e y o p m E l r o F e v r e s e R r a e y e h T f o s t i f o r P t e N * e s a e r c n I l a t i p a C e v r e s e R f o t r a P e g a s U i g n n r a E d e n a t e R i * * ) P O S E l i ( n a p p h s r e n w O r a e y e h T f O d n E e h T t A e c n a l a B ) 2 2 ( r e b m u n e t o n o t r e f e R * ) 0 3 ( r e b m u n e t o n o t r e f e R * * Commercial International Bank (Egypt) S.A.E. Notes to the Unconsolidated Financial Statements For the Financial Year from January 1, 2008 to December 31, 2008 (1) Organization and Activities Commercial International Bank (Egypt) S.A.E. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 69 Commercial International Bank (Egypt) S.A.E. was formed as a commercial Bank on August 7, 1975 under the Investment Law No. 43 for 1974. The Bank is licensed to carry out all commercial banking activities in Egypt through its Head Office and one hundred & five branches, in addition to forty eight units. (2) Significant Accounting Policies A) Basis of Preparing Financial Statements • The Unconsolidated Financial Statements are prepared in accordance with the Central Bank of Egypt regulations issued on 27th of June 2002 and its amendments in addition to amendments made to the financial investments issued on December 16, 2008 and in accordance with the related Egyptian laws and regulations. • The available for sale investments measurement have been changed as at 1st of January 2008 as explained in note 2 (F) and (G), from the lower of cost (taking into consideration the FX revaluations) or fair value with the differences to “Income Statement“ to fair value with changes to equity. The reclassification impact appears on the "Statement of Changes in Shareholders Equity" and the adjustments related to the previous years have been done retrospectively. • As a result of applying the new policies, all outstanding derivatives on the 1st of January 2008 have been recognized in the balance sheet and measured at fair value and the policy has been applied rate respectively. B) Transactions in Foreign Currencies • The Accounting records of the bank are maintained in Egyptian pounds. Transactions in foreign currencies conducted during the period are recorded at the foreign exchange rates prevailing at the time such transactions take place. • Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing at the balance sheet date. Currency translation differences on all monetary financial assets and liabilities are reported in the income statement in the following items: - Net trading income or net income arising from financial instruments originally classified as change in fair value through profit and loss for financial assets / liabilities held for trading or originally recorded at fair value through profit and loss. - Other operating income (loss) for other items. • The changes in fair value arising from monetary financial instruments classified as monetary items foreign currencies as available for sale (Debt Instruments) should be segregated to revaluation differences arising from changes in the instrument amortized cost to be recorded in “income from loans” and differences arises from foreign exchange rate changes to be recorded in “other operating income” and differences arises from change in fair value to be recorded in “fair value reserve for available for sale investments”. • Translation differences on non-monetary items (equity securities) held at fair value through income are also reported through income statement whereas for those classified as available-for-sale are recorded directly in equity within ‘Net unrealized gains and losses on available-for-sale assets’ item. C) Realization of Income • The bank applies the accrual basis in recording interest received from Loans & Overdrafts, Due from Banks, Treasury Bills, Reverse Repose and Bonds. Interest on past due Loans & Overdrafts are not recorded on the income statement. Dividends income is recognized when declared. D) Treasury Bills • Treasury Bills are recorded at face value. The issuance discount is recorded in Other Liabilities and deducted from the Gross Treasury Bills balance on the Balance Sheet and accounted for at amortized cost using the effective interest rate. E) Financial Assets Designated at fair value through income: • Consists of financial assets held for trading & financial assets that the bank upon initial recognition designates to be measured at fair value with changes reported in income. • Financial instruments held for trading are those that the Bank holds primarily for the purpose of short-term profit-taking or if it represents a part of specified financial instruments portfolio and there is an evidence of short-term profit-taking. Also derivatives are classified as held for trading unless the derivatives are qualified under hedging accounting. • Financial assets designated at fair value through income statement are recognized when it relates to an investment portfolio that are managed and evaluated on a fair value basis according to the investment strategies and the risk management and been reported to the senior management according to that basis. • Any derivative or financial instrument that designated to be measured at fair value with changes through profit and loss is not reclassified during the holding period from the group of financial instruments if it is initially classified as change in fair value through profit and loss. • At all circumstances the bank should not reclassify any financial instrument into financial instrument measured at fair value with changes through profit and loss or to financial assets held for trading. F) Held to Maturity Investments • Held to Maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the bank management has the ability and the intent to hold it for the foreseeable future or maturity. Any sales of a significant amount not close to their maturity -except the emergency cases - would result in the reclassification of all held to maturity investments as available-for-sale. G) Available-for-sale Investments • Non-derivative assets that have either been designated as available for sale or do not fit into one of the categories described above. Equity investments held without significant influence, which are not held for trading or elected to fair value through income, are classified as available- for-sale. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 71 H) Financial Assets • For the assets classified at fair value through P/L ,held to maturity investments and available for sale investments buying and selling operations are recognized as usual on the trade date which is the date that the bank is committed to buy or sell the financial asset . • A financial asset that does not originally classify at fair value through P/L is initially recognized at fair value plus transaction costs. A financial asset that is originally classified at fair value through P/L is initially recognized at fair value only and the transaction costs are transferred to P/L in “Net income from trading activities”. • A financial asset is derecognized when the rights to receive cash flows have expired or the Bank has transferred substantially all the risks and rewards of ownership. • Available for sale investments and financial assets designated at fair value through P/L are subsequently held at fair value whereas held to maturity investments are measured at amortized cost using the effective interest rate method. • Gains and losses arising from changes in the fair value of available-for-sale assets should be recognized directly in equity, through the statement of changes in equity, until the financial asset is sold, collected, or otherwise disposed of, at which time the cumulative gain or loss previously recognized in equity should be recognized in profit or loss. • Monetary assets’ interest income is recognized based on the amortized cost method in the income statement. The foreign currency revaluations differences related to available for sale investments are recognized in the income statement. Available for sale equity instruments related dividends are recognized in the income statement when they declared. • Fair values are obtained from quoted market prices in liquid markets. Where no active market exists, or quoted prices are unobtainable, the fair value is estimated using a variety of valuation techniques – including discounted cash flow and other pricing models. Inputs to pricing models are generally market-based when available and taken from reliable external data sources. If the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed, an entity may measure the equity instrument at cost minus any impairment losses. • Debt instruments can be reclassified from the available for sale investments to held to maturity investments at fair value when the bank has the intention and ability to hold to maturity. Any related Profits and losses that was previously recognized in equity are treated as follows: - Financial assets with fixed or determinable payments and fixed maturity valued at amortized cost, using the effective interest method in case of impairment the profits & losses that has been previously recognized directly in equity is removed from equity and recognized in the income statement. - Profits & losses related to financial assets without fixed or determinable maturity are held in equity till selling or dispose the asset then removed from equity and recognized in the income statement. In case of impairment the profits & losses that has been previously recognized directly in equity is removed from equity and recognized in the income statement. I) Investments in Subsidiaries and Associated Companies • These investments are evaluated at cost and in case of impairment of its fair value; the book value of each investment is adjusted by such impairment and charged to the income statement. In case of an increase in the fair value, such increase will be added to the same category in the income statement within the limit of the amounts previously charged. Also investments in jointly controlled companies are evaluated at cost. J) Netting • Financial assets and liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to set off the recognized amounts and there is an intention to settle on a net basis, or to realize an asset and settle the liability simultaneously. • Treasury Bills, Repos & reveres Repos agreements are netted on the balance sheet in ‘Treasury Bills and other discountable notes at CBE’. K) Derivatives & Embedded Derivatives • Derivatives are measured initially at fair value and subsequently re-measured at fair value. Fair values are obtained from quoted prices prevailing in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and options pricing models as appropriate. All derivatives are included in assets when their fair value is positive and liabilities when their fair value is negative. L) Repos & (Reverse Repos) Transactions • Repos (Reveres Repos) agreements are eliminated (recorded) on the financial position under “Treasury Bills and Other Notes Discountable at the CBE” whereas its cost (revenue) is recorded in “interest received from treasury Bills & Bonds” item in Income Statement using the effective interest method. M) Impairment of financial assets M/1) Financial Assets held to maturity The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or a portfolio of financial assets is impaired. A financial asset or portfolio of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the asset and prior to the balance sheet date ('a loss event') and that loss event or events has had an impact on the estimated future cash flows of the financial asset or the portfolio that can be reliably estimated. Objective evidence that a financial asset or a portfolio is impaired includes observable data that comes to the attention of the Bank about the following loss events: - Significant financial difficulty of the issuer or obligor; - It becomes probable that the borrower will enter bankruptcy or other financial Re-organization. M/2) Available-for-sale Investments - The Bank assess at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets under available for sale investments or held to maturity investment is impaired. In the case of equity instruments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether impairment exists. N) Assets Acquired for settlement of Debits • These Assets are recorded in the Financial Statement under “debit balances & Other Assets” at cost and in case of a decrease of the fair value of these assets at the Financial Statement date, the difference is charged to the income statement and the increase of the fair value should be credited to the income statement within the limit of amounts charged in previous financial periods. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 73 O) Provision for Doubtful Debts and Contingent Accounts: • Provision for Doubtful Debts is established on the basis of an appraisal of the identified risk for specific loans and contingent accounts in addition to general percentages from one to five according to the basis of appraising the customer’s credit worthiness issued by the central bank of Egypt on 6th of June 2005. • Provision for Doubtful Debts decreases by loans written off and increases by recoveries of loans previously written off. In addition to taking all the necessary legal action required, a continuous follow up is performed for the recovery of all or part of the written-off amounts. P) Contingent Liability Accounts • Contingent Liability Accounts include transactions in which the Bank is involved as a third party. Such transactions do not represent actual bank’s assets or liabilities at the Financial Statement date. Q) Cash & Cash Equivalent: • In the Statement of Cash Flow, the Cash and Cash Equivalent item includes balances of cash and due from Central Bank, current account balances with Banks and Treasury Bills with maturities of three months. R) Depreciation and Amortization: • Depreciation of Fixed Assets (except for land) is calculated on the basis of the estimated useful life of each asset using the straight-line method. • Improvement and renovation expenses for the bank's leased premises are amortized over the period of the lease contract or the estimated useful life whichever is lower. S) Share-based payments to employees • The Bank engages in equity settled share-based payment transactions in respect of services received from eligible employees. • The fair value of the services received is measured by reference to the fair value of the shares or equity instruments granted on the date of the grant. The cost of the employee services received in respect of the shares or equity instruments granted is recognized in the income statement over the period that the services are received, which is the vesting period. • The bank estimate of each balance sheet date the number of options expected to be exercised and account for the change in original estimates, if any, in income statement with the opposite equity account on the remaining period. • The net amount received by employees after calculating any related cost will be accounted in capital with par amount and premium account at the date of exercising the option. T) Taxes • Income Tax on the profit or loss for the financial period comprises current and deferred tax is recognized in the Income statement. • Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted at the financial position date. • Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position date. • A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. (3) Financial Instruments and their risk management (3/1)Financial Instruments A) The bank's financial instruments are represented in the financial Assets and Liabilities. The financial assets include cash, due from banks, investments and loans to customers and banks. The financial liabilities include customers' deposits, due to banks and long-term loans. Financial investments also include rights and obligations stated under " contingent liabilities and commitments " Note No. (2) Of the notes to the financial statements includes the accounting policies applied to measure and recognize significant financial instruments and the revenues and expenses related thereto. B) Forward Contract • According to Central Bank of Egypt instruction the bank doesn’t execute deferred contracts except to the necessary limit of short term transaction to cover its requirements of Foreign currencies or the bank’s customers’ requirements to fulfill their obligations resulting from short- term transactions. (3/2)Risk Management A) Interest rate risk The value of some financial instruments fluctuates due to the fluctuation in interest rates related thereto. The bank follows some procedures to minimize this risk such as: • Correlating between the interest rates on borrowing and lending. • Determining interest rates in consideration with the prevailing discount rates on various currencies. • Monitoring the maturities of financial assets and liabilities with its related interest rates. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 75 Notes No. (31&32) of the notes to the Financial Statements disclose maturities of the assets and liabilities and the average interest rates applied to assets and liabilities during the period. B) Credit risk • Loans to customers and Banks ,financial Investments (Bonds), due from banks, rights and obligations from others, are financial assets exposed to credit risk which result in these parties’ inability to repay in part or in full the loan granted to them at maturity. • The bank adopted the following procedures to minimize the credit risk: - Preparing credit studies about the customers before dealing with them and determining credit risk rates related thereto. - Obtaining adequate guarantees to reduce the risks resulting from insolvency of customers. - Monitoring and preparing periodic studies about customers in order to evaluate their financial and credit positions and estimate the required provisions for non - performing loans. - Distribution of loans portfolio and due from banks over various sectors to avoid concentration of risk. Note No. (34) Discloses the distribution of loans portfolio over various sectors. C) Foreign Currency Risk • The nature of the bank’s activity requires the bank to deal in many foreign currencies which expose the bank to the risk of fluctuation in exchange rates. To minimize this risk, the bank monitors the balances of foreign currency positions according to Central Bank of Egypt instructions in that respect. Note No. (35) Of the financial statements discloses significant foreign currency positions at the financial statement date. (4) Accounting estimates and assumptions - The preparation of financial statements requires management to make subjective judgments and estimates, at times, regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures. Those judgments and estimates are based on historical experience and other factors containing the expectations of the future events that are reasonable estimated in accordance of the available conditions & information. - The most significant areas requiring management to make judgments and estimates that affect reported amounts and disclosures are as follows: A) Impairment of the available for sale equity instruments: • In the case of available for sale financial investments, a significant or Continuous decline in the fair value of the security below its cost is considered as impairment. Where such evidence exists, significant or Continuous decline needs a personal judgment. To make this judgment the bank assesses –besides other factors- the common share price volatility. In addition, impairment exists when there is objective evidence that a certain company has a financial difficulty in its cash flow from operating and financing activities, industry tool or sector or technological advances. • If each significant or Continuous decline in the fair value of the security below its cost is considered, the bank will charge an additional loss of EGP 20,312,399 represents transferring all the fair value reserve to P/L. B) Derivatives’ Fair Value: • For the unquoted financial instruments, the fair value is determined using a variety of valuation techniques which are tested and reviewed periodically by high qualified staffs that are independent of those who created the models. The models used are validated prior put into use. Inputs to pricing models are generally market-based when available and taken from reliable external data sources. While areas like the bank credit risk, counterparties, volatility and correlations require management to make judgments & estimations. Changes in the assumptions related to these factors may affect the financial instruments fair values which have been disclosed. C) Held to maturity Investments: • Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held to maturity. This category requires personal judgment therefore the bank tests whether there is a genuine intent and ability to hold such investments to maturity. If the bank fails to hold such investments till maturity (except for certain tightly defined circumstances such as if an entity sells an insignificant amount of held- to-maturity investments close to maturity date), investments should be reclassified as available-for-sale, which will be measured at fair value instead of amortized cost. • If the bank fails to hold such investments till maturity. The investment book value will be increased (decreased) with EGP 54,035,585 to reach the fair value against the fair value reserve in equity. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 77 Dec. 31, 2007 EGP 1,081,319,202 1,996,073,908 1,875,812,320 4,953,205,430 Dec. 31, 2007 EGP 7,391,521,850 7,391,521,850 8,788,772 155,000,000 163,788,772 509,054,737 5,717,696,684 6,226,751,421 Dec. 31, 2008 EGP 1,085,952,584 3,387,059,358 2,020,346,495 6,493,358,437 Dec. 31, 2008 EGP 400,757,450 400,757,450 65,708,935 309,143,900 374,852,835 628,734,537 2,986,706,427 3,615,440,964 4- Cash And Due From Central Bank - Cash & Cash Items - Reserve Balance with CBE (A) Current Accounts (B) Time Deposits Total Cash & Due From Central Bank 5- Due from Banks (A) Central Bank - Time Deposits Total Due from central bank (B) Local Banks - Current Accounts - Time Deposits Total Due from Local Banks (C) Foreign Banks - Current Accounts - Time Deposits Total Due From Foreign Banks Total Due From Banks 4,391,051,249 13,782,062,043 6- Treasury Bills and other Governmental Notes - 91 Days Maturity - 182 Days Maturity - 364 Days Maturity - Unearned Income Total Reverse Repos Dec. 31, 2008 EGP 3,515,475,000 1,951,800,000 5,627,175,000 11,094,450,000 (612,265,165) 10,482,184,835 1,966,822,571 12,449,007,406 Dec. 31, 2007 EGP 1,313,750,000 748,800,000 970,750,000 3,033,300,000 (84,625,681) 2,948,674,319 - 2,948,674,319 7- Financial Assets For Trading Debt Instruments - Government Bonds - Other Debt Instruments Total Debt Instruments Equity Instruments - Foreign Company Shares - Mutual Fund Total Equity Instruments Dec. 31, 2008 EGP 101,369,914 44,776,795 146,146,709 59,440,478 291,967,300 351,407,778 Dec. 31, 2007 EGP 51,603,627 64,370,759 115,974,386 100,666,274 371,832,610 472,498,884 Total Financial Assets For Trading 497,554,487 588,473,270 8- Financial Investment Financial Investment Available for Sale - Debt Instruments Listed - Fair Value - Equity Instruments Listed - Fair Value - Unlisted Instruments Total Financial Investment Available for Sale (1) Financial Investment Held to Maturity Debt Instruments - Listed - Unlisted Total Financial Investment Held to Maturity (2) Total Financial Investment (1+2) Listed Balances Unlisted Balances Total Fixed Interest Debt Instruments Variable Interest Debt Instruments Total Dec. 31, 2008 EGP 1,921,272,094 244,823,746 596,137,143 2,762,232,983 306,374,803 374,888,471 681,263,274 3,443,496,257 2,472,470,643 971,025,614 3,443,496,257 1,832,967,710 769,567,658 2,602,535,368 Dec. 31, 2007 EGP 1,462,208,120 291,333,688 594,045,858 2,347,587,666 311,494,817 132,399,349 443,894,166 2,791,481,832 2,065,036,625 726,445,207 2,791,481,832 1,339,637,012 566,465,274 1,906,102,286 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 79 Total 4,000,447,850 1,814,992,095 (3,037,672,306) (38,933,733) 56,833,304 (4,185,378) 2,791,481,832 2,791,481,832 11,666,296,137 (10,885,257,036) (6,576,438) (81,995,801) (40,452,436) 3,443,496,258 Dec. 31, 2007 EGP 122,815,034 (29,016,847) (16,056,744) 148,393,558 Opening Balance 1/1/2007 Addition Deduction (Selling - Recovery) Financial Investment Available for Sale 3,178,163,512 1,814,992,095 (2,673,473,661) Differences in revaluation of the Cash Assets in Foreign Currencies (24,742,206) Profit from Fair value Difference Deduct - Impairment Losses Ending Balance 31/12/2007 Opening Balance 1/1/2008 Addition Deduction (Selling - Recovery) Differences in revaluation of the Cash Assets in Foreign Currencies Profit from Fair value Difference Deduct - Impairment provision Ending Balance 31/12/2008 Profit (Losses) from Financial Investment 56,833,304 (4,185,378) 2,347,587,666 2,347,587,666 11,153,380,395 (10,611,700,507) (7,219,107) (81,995,801) (37,819,662) 2,762,232,984 Profit (Losses) from selling Available for Sale Financial Instruments Losses from Impairment of Equity Instruments Available for Sale (Losses) From Available for Sale Debt Instruments Reverse of Impairment Profit (Losses) from Selling Investments in Subsidiaries and associates. Financial Investment Held to Maturity 822,284,338 - (364,198,645) (14,191,527) - - 443,894,166 443,894,166 512,915,742 (273,556,529) 642,669 - (2,632,774) 681,263,274 Dec. 31, 2008 EGP 120,409,400 (47,618,230) (7,219,106) 50,258,991 Total 115,831,055 226,135,001 An Amount Of EGP 207,246,166 Classified as of Held To Maturity Investment Instead Of Available For Sale Investment 9- Other Operating Income Profits (Losses) From Assets & Liabilities Revaluation Except Trading Profits (Losses) From Selling Equipments And Fixed Assets Recovery From Other Provisions Others Dec. 31, 2008 Dec. 31, 2007 EGP 8,676,929 5,052,568 165,365,215 3,953,701 183,048,413 EGP 13,024,355 1,269,870 - (14,112,549) 181,676 10- Loans and Overdrafts - Discounted Bills - Loans & Overdrafts to Customer - Loans & Overdrafts to Banks - Unearned Bills Discount - Provision For Doubtful Debts - Interest in suspense Net Loans & Overdrafts 11- Provision For Doubtful Debts Dec. 31, 2008 - Balance at Beginning of The year - Formed During The year - Recoveries from Written Off Debts - Foreign Currency Revaluation Diff. - Usage During The year Dec. 31, 2008 Dec. 31, 2007 EGP 795,836,842 26,867,609,401 344,498,810 28,007,945,053 (119,310,349) (1,408,297,328) (150,009,498) 26,330,327,878 Specific EGP 491,530,222 175,941,000 63,759,860 5,054,571 736,285,653 (96,061,356) EGP 369,367,153 20,979,609,432 501,437,453 21,850,414,038 (33,299,487) (1,089,969,238) (248,554,472) 20,478,590,841 General EGP 598,439,016 169,634,015 - - 768,073,031 - Total EGP 1,089,969,238 345,575,015 63,759,860 5,054,571 1,504,358,684 (96,061,356) Balance at The End of The year 640,224,297 768,073,031 1,408,297,328 Dec. 31, 2007 - Balance at Beginning of The Year - Formed During The year - Recoveries from Written Off Debts - Foreign Currency Revaluation Diff. - Usage During The Year - Transferred from Specific to General Provision Specific EGP 551,958,000 91,524,201 44,472,711 (8,580,249) 679,374,663 (177,835,496) (10,008,945) General EGP 486,950,021 101,480,050 - - 588,430,071 - 10,008,945 Total EGP 1,038,908,021 193,004,251 44,472,711 (8,580,249) 1,267,804,734 (177,835,496) - Balance at the end of the Year 491,530,222 598,439,016 1,089,969,238 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 81 12- Financial Derivatives The bank uses the following financial derivatives for non hedging purposes. * Forward contracts represents commitments of buying foreign and local currencies including unexecuted spot transactions. Future contracts for foreign currencies and/or interest rates represents contractual commitments to receive or pay net amount on the basis of changes in foreign exchange rates or interest rates, and/or buying or selling foreign currencies or financial instruments in a future date with a fixed contractual price under active financial market. * Credit risk is considered low, and future interest rate contracts represents future exchange rate contracts negotiated for case by case, these contracts requires financial settlements of any differences in contractual interest rates and prevailing market interest rates on future dates based on contractual amount (nominal value) pre agreed upon. * Foreign exchange and/or interest rate swap represents commitments to exchange cash flows, resulting from these contracts exchange of currencies or interest (fixed rate versus variable rate for example) or both (meaning foreign exchange and interest rate contracts)/ contractual amounts are not exchanged except for some foreign exchange contracts * Credit risk is represented in the expected cost of foreign exchange contracts that takes place if other parties default to fulfill their liabilities. This risk is monitored continuously through comparisons of fair value and contractual amount, and to control continuously through comparisons of fair value and contractual amount, and to control the outstanding credit risk, the bank evaluates other parties using the same methods as in borrowing activities. * Options contracts in foreign currencies and/or interest rates represents contractual agreements for the buyer (issuer) to seller (holders) as a right not an obligations whether to buy (buy option) or to sell (sell option) at a certain day or within certain period for a certain amount in foreign currency or interest rate. Options contracts are either traded in the market or negotiated between the bank and one of its client (Off balance sheet). The bank exposed to credit risk for purchased options contracts only and in the line of its book cost which represent its fair value. * The contractual value for some derivatives options considered a base to compare the realized financial instruments on the balance sheet, but it didn’t provide indicator on the projected cash flows of the fair value for current instruments, those amounts doesn’t reflect credit risk or interest rate risk. * Derivatives in the banks benefit represent (assets) conversely it represents (liabilities) as a result of the changes in foreign exchange prices or interest rates related to these derivatives. Contractual / expected total amounts of financial derivatives can fluctuate from time to time and also the range through which the financial derivatives can be in benefit of the bank or conversely against its benefit and the total fair value of the financial derivatives in assets and liabilities. Hereunder are the fair values of the booked financial derivatives. For Trading Derivatives Foreign Derivatives - Forward Foreign exchange contracts 2,572,060,181 31,916,357 31,680,875 3,603,088,630 9,729,116 2008 Amount Assets Liability Amount 2007 Assets Liability 8,983,093 - Currency swap - Options Total Derivatives (1) Interest rate derivatives - Interest rate Swaps Total Derivatives (2) - Commodity Total Derivatives (3) Total Assets (liability) For Trading Derivatives (1+2+3) 3,457,152,333 65,087,047 57,539,919 4,095,848,478 25,528,958 51,068,349 112,099,475 1,080,796 1,080,796 8,018,830 13,753 13,753 98,084,200 90,301,590 - 35,271,827 60,065,195 1,730,052 63,646,403 63,646,403 3,452,965 3,452,965 1,728,760,514 40,036,007 40,036,007 3,101,568 3,101,568 1,235,414,832 543,160,189 543,160,189 543,160,189 543,160,189 - - 704,890,792 636,914,744 75,307,834 63,166,763 13- Financial Investments in Subsidiary and Associated Companies A- Subsidiary Companies: - Commercial International Capital Holding Co. * 1,045,411,957 99.98 275,511,540 50.09 Dec. 31, 2008 % Dec. 31, 2007 % EGP EGP B- Associated Companies: - Contact for Cars Trading - Commercial International life insurance co. - Corplease co. - Cotecna Trade Support - Haykala For Investment - Egypt Factors - International. Co. for Appraisal & Collection. - International Co. for Security & Services ( Falcon ) The Financial Investments in subsidiary companies are represented as follows :- - Financial Investments listed in Stock Exchange - Financial Investments Unlisted in Stock Exchange - 45 40 39 40 39 40 40 - 44,520,250 32,000,000 48,750 600,000 10,751,715 1,000,000 4,000,000 1,138,332,672 1,045,411,957 92,920,715 1,138,332,672 38.4 40 40 39 40 39 40 40 31,000,000 32,000,000 18,400,000 48,750 600,000 3,763,646 400,000 4,000,000 365,723,936 275,511,540 90,212,396 365,723,936 * CIB Share Reached 99.98% (54988000 Shares) After Finalizing Acquisition Process for Remaining CI Capital Holding Co. in 09/07/2008 According to The Shareholders agreement Signed in 17/06/2008 14- Capital Commitments :- - Financial Investments The Capital Commitments For The Financial Investments Reached On The Date Of balance Sheet EGP198,681,919 as follows :- Available for Sale Financial Investments Financial Investments in Subsidiaries and associated companies Investments value EGP 611,775,824 1,395,000 Paid EGP Remaining EGP 413,840,156 197,935,669 648,750 746,250 - Fixed Assets & Branches Constructions The value of Commitments for the purchase of fixed assets contracts and branches constructions that have not been implemented till the date of financial statement amounted to EGP 4,904,068. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 83 Dec. 31, 2008 Dec. 31, 2007 EGP 406,019,416 53,438,701 90,340,427 52,165,659 340,657,279 - 942,621,482 - 942,621,482 EGP 460,512,142 52,588,918 204,554,366 29,361,646 275,561,186 241,625,336 1,264,203,594 (243,638,021) 1,020,565,573 15- Debit Balances and Other Assets Accrued Revenues Prepaid Expenses Advances for Purchase of Fixed Assets Assets Acquired as Settlement of Debts * Accounts receivable & Other Assets *** Accrued Balances of Customers Loans ** Deduct Provision for General & Insurance Risk ** Total Debit Balances and Other Assets * This Include The Value Of Premises That Was Not Recorded Under The Bank's Name By EGP 32,682,053 Which Were Acquired Against Settlement Of The Debts Mentioned Above, In The Same Time The Legal Procedures Are Under Process To Register Or Sell These Assets Within The period required by law. ** These Balances Carried Forward From Previous Year Represent Certain Advances To Customers That Were Made At One Of The Branches In Violation Of The Bank's Standard Operating Procedures For Facilities Policies, Resulting In Reclassifying These Balances Under Other Debit Balances Conservative Provisions Were Adequately Reallocated From Other Provisions To Meet The Relevant Operation Risk And The case Setteled During Year 2008 *** Include EGP 15,955,151 as Assets Held For Sale. 16- Net Fixed Assets (Net of Accumulated Depreciation) Dec. 31, 2008 Machines & Furniture & Land EGP Premises EGP IT EGP Vehicles Fitting -Out Equipment Furnishing EGP EGP EGP EGP Total EGP Opening Balance (3) 59,786,060 298,200,192 406,196,928 20,771,267 139,643,839 169,413,585 76,822,124 1,170,833,995 Additions (Deductions) During The year 1,283,388 35,162,427 113,059,285 305,448 50,089,658 47,603,582 14,461,304 261,965,092 Closing Balance (1) 61,069,448 333,362,619 519,256,213 21,076,715 189,733,497 217,017,167 91,283,428 1,432,799,087 Accu. Depreciation at Beginning of The year (4) Current year Depreciation Accu. Depreciation at end of The year (2) - - - 91,389,674 247,953,560 17,798,473 88,854,558 83,740,254 33,992,656 563,729,175 15,144,584 71,612,245 1,348,769 33,149,425 23,025,895 9,537,407 153,818,325 106,534,258 319,565,805 19,147,242 122,003,983 106,766,149 43,530,063 717,547,500 End of year Net Assets (1-2) 61,069,448 226,828,361 199,690,408 1,929,473 67,729,514 110,251,018 47,753,365 715,251,587 Beginning of year Net Assets (3-4) 59,786,060 206,810,518 158,243,368 2,972,794 50,789,281 85,673,331 42,829,468 607,104,820 Depreciation rates 5% 20% 20% 33.3% 12.5% 10% * Net fixed assets value on the Balance Sheet date includes EGP 73,303,957 non registered assets while their registrations procedures are in process. 17- Due to Banks (a) Central Bank - Current Accounts - Time Deposits Total Due to Central Bank (b) Local Banks - Current Accounts - Time Deposits Total Due to Local Banks (c) Foreign Banks - Current Accounts - Time Deposits Total Due to Foreign Banks Dec. 31, 2008 EGP 75,056,264 - 75,056,264 19,309,126 - 19,309,126 116,257,050 2,847,572 119,104,622 Dec. 31, 2007 EGP 80,028,494 2,012,792,500 2,092,820,994 24,932,808 28,480,310 53,413,118 199,834,891 31,013,432 230,848,323 Total Due to Banks 213,470,012 2,377,082,435 18- Customers' Deposits - Demand Deposits - Time & Notice Deposits - Saving & Deposit Certificates - Saving Deposits - Other Deposits Total Customer Deposits 19- Credit Balances and Other Liabilities - Accrued Interest Payable - Accrued Expenses - Accounts Payable - Income Tax - Other Credit Balances Total Credit Balances And Other Liabilities Dec. 31, 2008 EGP 13,126,519,017 19,946,603,875 7,395,350,361 7,316,052,948 1,153,583,462 48,938,109,663 Dec. 31, 2007 EGP 11,586,418,467 13,622,910,338 5,957,646,007 6,517,256,544 1,830,308,636 39,514,539,992 Dec. 31, 2008 Dec. 31, 2007 EGP 208,568,878 68,214,404 674,949,796 209,809,805 33,050,662 1,194,593,545 EGP 176,020,513 31,856,339 300,867,471 180,386,954 45,972,518 735,103,795 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 85 20- Long Term Loans - F.I.S.C. - K.F.W - UNIDO Rate % Maturity date Maturing through Balance as of Balance as of 7 9-10.5 1 3-5 years 10 years 2011 next year EGP 12,000,000 6,935,659 517,480 Dec. 08 EGP Dec. 07 EGP 30,439,600 40,565,200 16,010,946 15,195,955 847,580 8,038,908 - Ministry of Agriculture (F.S.D.P) 3.5 - 5.5 3-5 years 41,884,205 58,804,557 92,594,906 depends on maturity date 3.5 - 5.5 depends on maturity date 3-5 years 65,000 125,000 10,000 3 months T/D 2010 1,560,000 3,046,250 4,951,250 or 9% which more 62,962,344 109,273,933 161,356,219 - Ministry of Agriculture (V.S.P) - Social Fund Total 21- Other Provisions Opening Balance Formed FCY Balance Usage Balance Closing During the year Reval. Difference During the year No Longer Required Balance Dec. 31, 2008 EGP - Provision for Income Tax Claims 227,173,695 - - (10,264,010) (70,000,000) 146,909,685 - Provision for Legal Claims 1,123,118 487,075 - Provision for Contingent 167,036,000 38,760,000 (1,194) 517,939 (337,886) - - - 1,271,113 206,313,939 - Provision for Other Claim - 9,723,449 - (341,489) (658,511) 8,723,449 Total Other Provisions 395,332,813 48,970,524 516,745 (10,943,385) (70,658,511) 363,218,186 Provision for Income Tax Claims Provision for Legal Claims Provision for Contingent Total Other Provisions Opening Balance 227,173,695 1,126,794 111,524,889 339,825,378 Dec. 31, 2007 EGP Formed FCY Balance Usage Balance Closing During the year Reval. Difference During the year No Longer Required Balance - - 57,412,416 57,412,416 - (3,676) (1,901,305) (1,904,981) - - - - - - - - 227,173,695 1,123,118 167,036,000 395,332,813 22- Shareholders Equity (a) Capital - The Authorized Capital Reached EGP 5000 Million According To The Extraordinary General Assembly Decision On 19,Mar,2006 - Issued And Paid In Capital Reached EGP 2925 Million To Be Divided On 292.5 Million Shares With EGP 10 Par Value For Each Share On 31/07/2008 According To Board Of Directors Decision On 21/02/2008 By Using 975 Million From General Reserve . - The Extraordinary General Assembly Approved In The Meeting Of June, 26,2006 To Activate A Motivating And Rewarding Program For The Bank's Employees & Managers Through Employee Share Ownership Plans (ESOP) By Issuing A Maximum Of 5% Of Issued And Paid-In Capital At Par Value ,Through 5 Years Starting 31,Dec. 2006 And Delegated The Board Of Directors To Establish The Rewarding Terms & Conditions And Increase The Paid In Capital According To The Program. (b)Reserves - According To The Bank Statues 5% Of Net Profit Is To Increase Legal Reserve Until Reaches 50% Of The Bank's Issued And Paid In Capital - Concurrence Of Central Bank Of Egypt For Usage Of Special Reserve Is Required . - According To CBE Regulations, A Reserve And Retained earnings Accounts Has Been Formed For Difference Revaluation For Financial Investment (Available For Sale) For Prior Years 23- Contingent Liabilities & Commitments Letters of Guarantee Letters of Credit ( Import & Export ) Customers Acceptances Dec. 31, 2008 EGP 10,852,904,384 1,933,869,400 504,220,921 Dec. 31, 2007 EGP 8,710,811,993 2,233,007,892 616,046,795 Total 13,290,994,705 11,559,866,680 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 87 Dec. 31, 2007 EGP 3,925,710 1,712,418,676 1,716,344,386 323,476,235 739,391,447 77,368,908 136,792,638 2,993,373,614 69,203,483 1,506,576,968 1,575,780,451 3,579,534 217,342,046 Dec. 31, 2008 EGP 5,549,512 2,003,772,928 2,009,322,440 623,471,960 1,032,068,228 49,785,679 58,227,573 3,772,875,880 97,515,593 1,786,456,286 1,883,971,879 6,245,478 73,443,883 1,963,661,240 1,796,702,031 1,809,214,640 1,196,671,583 Dec. 31, 2008 EGP 277,942,194 (1,319,226) (1,555,899) 23,259,000 26,932,691 53,231,649 (40,911,023) 337,579,386 Dec. 31, 2007 EGP 153,821,842 (5,101,086) (689,232) 23,386,836 41,353,081 46,663,091 16,757,323 276,191,855 24- Net Interest Income Interest Received from Loans and similar items. Loans & Facilities Banks Clients Total Treasury Bills & Bonds Deposits & Current Account Financial Investment In Debt Instruments Held to Maturity & Available for Sale Other Total Interest Paid on deposits and similar items Deposits & Current Account:- Banks Clients Total Other Loans Other Total Net 25- Trading Net Profit Foreign exchange operations:- Profit (Losses)From Foreign exchange Profits (Losses) from Revaluing Trading Assets & Liabilities in Foreign Currencies Profit (Losses)From Forward Foreign exchange Deals Revaluation Profit (Losses)From Interest rate Swap Revaluation Profit (Losses)From Currency Swap Deals Revaluation Debt Instruments For Trading Equity Instruments For Trading Total 26- Comparative Figures As a Result of Changing The Accounting Standards Concerning The Financial Investments, The Bank Has restated the Comparative Figures (as mentioned in note 2A) For Some Items In Balance Sheet and Income Statement as Hereunder: Financial Investment Available For Sale Financial Derivatives Debit Balances Credit Balances Special Reserves Fair Value Reserve (Available For Sale Financial Investment) Retained Earnings Net Trading Income Profits (losses) Financial Investments Income Tax - The Comparative Figures Are Amended as well To Confirm With The General Assembly Held on 17th Of March, 2008 Decisions, For Ratifying The Appropriation Account Of Year 2007. 27- Deferred Tax Assets and Liabilities Recognized Deferred Tax Assets (Liabilities) Deferred Tax Assets And Liabilities Are Attributable To The Following: Deferred Tax - Fixed Assets (Depreciation) - Other Provisions (Excluded Loan Loss & Contingent Liabilities And Income Tax Provisions) - Other Items(Other Investments Revaluation Difference) - Reserve For Employee Stock Ownership Plan (ESOP) - Total Deferred Tax Assets(Liabilities) Balance Before Restatement Balance After Restatement EGP 2,279,926,299 - - 162,709,903 4,870,506 - 212,982,610 276,290,900 (167,662,101) EGP 2,347,587,666 75,307,833 63,166,763 213,609,315 60,903,531 11,628,342 276,191,855 226,135,001 (180,303,950) Assets (liabilities) Assets (liabilities) Dec. 31, 2008 EGP Dec. 31, 2007 EGP (26,037,670) 1,998,913 28,533,744 17,345,581 21,840,568 (22,155,045) 48,952,228 20,190,375 5,831,917 52,819,475 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 89 Dec. 31, 2007 EGP 1,400,941,463 20% 280,188,293 424,416 (139,463,112) 26,967,598 168,117,194 12.00% Dec. 31, 2007 EGP 1,232,824,269 (18,492,364) (123,282,427) 1,091,049,478 292,500,000 3.73 294,409,350 3.71 Dec. 31, 2008 EGP 1,855,889,170 20% 371,177,834 4,675,448 (130,962,123) (4,102,447) 240,788,712 12.97% Dec. 31, 2008 EGP 1,615,100,458 (24,226,507) (161,510,046) 1,429,363,905 292,500,000 4.89 295,478,665 4.84 28- Reconciliation of effective tax rate - Profit Before Tax - Tax Rate Income Tax based on accounting profit Add / (Deduct) - Non-Deductible Expenses - Tax Exemptions - Effect Of Provisions Income Tax Effective Tax Rate 29- Earning Per Share - Net Profit For The year - Board Member's Bonus - Staff Profit Sharing - Shareholders' Share In Profits - Number Of Shares - Earning Per Share * By Issuance Of ESOP Shares Earning Per Share Will Be: - Number Of Shares Including ESOP Shares - Diluted Earning Per Share 30- Share-Based Payments: According To The Extraordinary General Assembly Meeting On June 26, 2006 , The Bank launched A New Employees Share Ownership Plan (Esop) Scheme And Issued Equity-Settled Share-Based Payments .Such Employees Should Complete A Term Of 3 Years Of Service In The Bank To Have The Right In Ordinary Shares At Face Value(Right To Share) That Will Be Issued On The Vesting Date, Otherwise Such Grants Will Be Forfeited. Equity-Settled Share-Based Payments Are Measured At Fair Value At The Grant Date, And Expensed On A Straight-Line Basis Over The Vesting year (3 Years) With Corresponding Increase In Equity Based On Estimated Number Of Shares That Will Eventually Vest.The Fair Value For Such Equity Instruments Is Measured By Use Of Black-Scholes Pricing Model. Details Of The Rights To Share Outstanding During The year Are As Follows: Outstanding At The Beginning Of The year Granted During The year Forfeited During The year Exercised During The year Expired During The year Outstanding At The End Of The year - The Estimated Fair Value Of The Equity Instrument Granted To The First Tranch Is EGP 45.82 . - The Estimated Fair Value Of The Equity Instrument Granted To The Second Tranch Is EGP 81.18 . Number of Shares 1,909,350 1,276,665 (207,350) - - 2,978,665 31- Assets & Liabilities Maturities Assets - Cash And Due From Central Bank - Due From Banks - Treasury Bills And Other Governmental Notes - Trading Investments - Available For Sale Investments - Customers' Loans & Overdrafts - Banks' Loans & Overdrafts - Held To Maturity Investments - Investments In Subsidiary Companies - Debit Balances And Other Assets Liabilities - Due to Banks - Customer Deposits - Long Term Loans - Credit Balances and Other Liabilities Maturity Within one year 6,493,358,437 4,391,051,249 13,061,272,571 497,554,487 2,762,232,983 14,721,451,328 79,687 20,051,249 - 942,621,482 Maturity Over One Year - - - - - 12,791,985,417 344,419,123 661,212,025 1,138,332,672 - 42,889,673,473 14,935,949,237 213,470,012 41,524,201,001 62,962,344 1,194,593,545 - 7,413,908,662 46,311,589 - 42,995,226,902 7,460,220,251 32- Interest Rate - The Average Interest Rates Applied for Assets and Liabilities During The Year Are 7.21 % & 3.65 % Respectively. 33- Tax Status - The Bank's Corporate Income Tax Position Has Been Examined And Settled With The Tax Authority From The Start Up Of Operations Up To The End Of Year 1984. - Corporate Income Tax For The Years From 1985 Up To 2000 Were Paid According To The Tax Appeal Committee Decision And The Disputes Are Under Discussion In The Court Of Law . - The Bank's Corporate Income Tax Position Has Been Examined And Settled With The Tax Authority From 2001 Up To 2004 . - Corporate Income Tax For The Years 2005-2006 Will Be Examined From The Tax Authority - The Bank Pays Salary Tax According To Concerning Domestic Regulations And Laws, And The Disputes Are Under Discussion In The Court Of Law . - The Bank Pay Stamp Duty Tax According To Concerning Domestic Regulations And Laws, And The Disputes Are Under Discussion In The Court Of Law . CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 91 Local Currency Foreign Currency 481,576,209 3,909,475,039 62,198,759 10,499,496,255 1,375,973,774 11,392,863,009 2,277,076,866 2,400,336,389 28,007,945,052 (119,310,349) (1,408,297,328) (150,009,498) 26,330,327,877 % 0.2 37.5 4.9 40.7 8.1 8.6 100 5.0 Local Currency Foreign Currency 20,593,961 192,876,051 95,133,156 5,762,542,659 1,955,118,330 11,269,398,263 24,711,197,433 5,144,719,822 48,938,109,663 % 0.2 11.8 4.0 23 50.5 10.5 100 Local Currency Foreign Currency 3,933,512,215 12,639,451 64,388,766 6,919,392,169 1,921,229,949 439,832,155 4,010,540,432 9,280,454,273 34- Distribution of Assets, Liabilities and Contingent Accounts Assets 1- Due From Banks 2- Loans & Overdrafts Agriculture Sector Industrial Sector Trading Sector Services Sector Household Sector Other Sectors Total Loans & Overdrafts (Including unearned interest) Unearned Discounted Bills Provision for Doubtful Debts Unearned Interest & Commission Net Loans & Overdrafts Liabilities 1- Due to Banks 2- Customers' Deposits Agriculture Sector Industrial Sector Trading Sector Services Sector Household Sector Other Sector Total Customers' Deposits Contingent Accounts - Letters Of Guarantee - Letter Of Credit ( Import & Export ) - Customers Acceptances 35- Main Currencies Positions - Egyptian Pound - US Dollar - Sterling Pound - Japanese Yen - Swiss Franc - Euro 36- Mutual Funds (1) Osoul Fund Dec. 31, 2008 in thousand EGP Dec. 31, 2007 in thousand EGP (6,756) 4,714 (3,303) (333) 1,024 15,811 (13,959) (56,955) (389) (377) 821 14,449 - The Bank Established An Accumulated Return Mutual Fund Under License No.331 Issued From Capital Market Authority On 22/02/2005. CI Assets Management Co. Joint Stock Co - Manages The Fund. - The Number Of Certificates Reached 30,647,805 With Redeemed Value LE 4,194,458,592. - The Market Value Per Certificate Reached EGP 136.86 On 31/12/2008. - The Bank Portion Got 2,321,802 Certificates With Redeemed Value EGP 317,761,822 . (2) Istethmar Fund - CIB Established The Second Accumulated Return Mutual Fund Under License No.344 Issued From Capital Market Authority On 26/02/2006. CI Assets Management Co.- Joint Stock Co - Manages The Fund. - The Number Of Certificates Reached 3,481,368 With Redeemed Value LE 227,368,144. - The Market Value Per Certificate Reached EGP 65.31 On 31/12/2008. - The Bank Portion Got 174,072 Certificates With Redeemed Value EGP 11,368,642. (3) Aman Fund ( CIB & Faisal Islamic Bank Mutual Fund) - The Bank & Faisal Islamic Bank Established An Accumulated Return Mutual Fund Under License No.365 Issued From Capital Market Authority On 30/07/2006. CI Assets Management Co.- Joint Stock Co - Manages The Fund. - The Number Of Certificates Reached 1,227,413 With Redeemed Value LE 68,501,920. - The Market Value Per Certificate Reached EGP 55.81 On 31/12/2008. - The Bank Portion Got 30,686 Certificates With Redeemed Value EGP 1,712,586. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 93 37- Transactions With Related Parties All Banking Transactions With Related Parties Are Conducted In Accordance With The Normal Banking Practices And Regulations Applied To All Other Customers Without Any Discrimination. - Loans & Overdrafts - Investment in Subsidiary Companies - Customer Deposits - Contingent Accounts - International Co. for Security & Services - Corplease Co. - Commercial International Life Insurance Co. - Commercial International Brokerage Co. - Dynamic Company - Egypt Factors - CI Assets Management - Commercial International Capital Holding Co. EGP 319,307,234 1,237,667,822 287,923,092 47,864,230 Income (EGP) Expenses (EGP) 1,001,416 48,104,095 7,265,684 18,594,523 31,316 82,463 3,008,089 111,342 36,639,026 575,188 1,812,838 979,343 - 140,860 74,795 - Financial Statement B. Consolidated CIB & CI-CH CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 95 Financial Statement B. Consolidated CIB & CI-CH Commercial International Bank (Egypt) S.A.E. Consolidated Balance Sheet as of Dec. 31, 2008 Assets - Cash & Due From Central Bank - Due From Banks - Treasury Bills and other Governmental Notes - Trading Financial Assets - Loans & Overdrafts - Financial Derivatives - Financial Investments: Available for Sale Held to Maturity Financial Investments - Financial Investments in Associated Co. - Brokers - Debit Balances - Reconciliation accounts- Debit Balances - Debit Balances & Other Assets - Goodwill - Intangible Assets - Deferred Tax - Fixed Assets (Net) - Total Assets Liabilities & Shareholder's Equity Liabilities - Due to Banks - Customers Deposits - Brokers- Credit Balances - Reconciliation accounts - Credit Balances - Financial Derivatives - Credit Balances & Other Liabilities - Long Term Loans - Other Provisions - Total Liabilities Shareholders' Equity - Paid in Capital - Reserves - Retained Earnings - Reserve for employee stock ownership plan (ESOP) - Net Profit of the year - Total Shareholders' Equity & Net Profit - Minority Interest - Total Shareholders' Equity and Minority Interest - Total Liabilities & Shareholders' Equity Note No. Dec. 31, 2008 EGP (5) (6) (7) (8) 6,493,360,095 4,551,845,285 12,456,955,210 641,627,430 (11&12) 26,330,327,878 (13) (9) (9) (14) (16) (39) (39) (28) (17) (18) (19) (13) (20) (21) (22) (31) (23) 704,890,792 2,774,965,250 681,263,274 92,923,215 151,604,732 - 972,855,164 200,523,251 640,938,786 19,372,767 748,340,702 57,461,793,831 228,994,222 48,790,029,809 200,921,933 27,897,554 636,914,744 1,229,280,358 109,273,933 372,645,236 51,595,957,789 2,925,000,000 1,335,817,804 99,069,113 86,727,903 1,370,592,742 5,817,207,562 48,628,480 5,865,836,042 57,461,793,831 Dec. 31, 2007 EGP (Restated) 4,953,205,430 13,883,232,504 2,951,621,063 683,832,861 20,478,590,841 75,307,833 2,353,862,934 443,894,166 90,714,548 122,917,170 21,108,871 1,035,176,214 140,613,801 - 51,900,192 620,238,882 47,906,217,310 2,378,613,378 39,476,052,841 162,358,363 1,292,008 63,166,763 759,678,951 161,356,219 397,924,539 43,400,443,062 1,950,000,000 1,194,226,652 41,349,498 29,159,584 1,285,775,354 4,500,511,088 5,263,160 4,505,774,248 47,906,217,310 - Contingent Liabilities & Commitments (24) 13,290,944,705 11,559,841,635 The Accompanying Notes are an integral part of the Financial Statements and are to be read therewith " Audit Report Attached ". CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 97 Dec. 31, 2007 EGP (Restated) 2,998,066,645 (1,797,842,883) 1,200,223,762 665,185,633 (25,286,540) 639,899,093 71,536,293 276,721,777 (250,988,033) 226,736,631 - (697,705,206) 5,267,755 - 1,471,692,072 (194,218,288) 11,459,368 1,288,933,152 2,746,306 1,286,186,846 3.89 3.87 Commercial International Bank (Egypt) S.A.E. Consolidated Income Statement For The Year Ended Dec. 31, 2008 Note No. Dec. 31, 2008 - Interest and similar income - Interest and similar Expenses Net Interest Income - Fees & Commissions Income - Fees & Commissions Expense Net Income From Fees & Commissions - Dividends Income - Net Trading Income - Provisions - Profit (Losses) from Financial Investments - Goodwill Impairment - Administrative Expenses - Other Operating Income - Intangible Assets Amortization Net Profit Before Tax - Income Tax - Deferred Tax Net Profit After Tax - Minority Interest - Bank Shareholders - Earning Per Share - Basic Diluted (25) (25) (26) (9) (10) (29) (29& 28) EGP 3,765,207,513 (1,966,547,421) 1,798,660,092 821,333,569 (73,587,145) 747,746,424 102,559,579 345,367,741 (410,519,381) 109,312,249 (183,698,000) (1,038,662,088) 179,386,060 (33,733,620) 1,616,419,056 (218,777,585) (32,226,272) 1,365,415,199 (5,177,543) 1,370,592,742 (30) (30) 4.15 4.11 Commercial International Bank (Egypt) S.A.E. Consolidated Cash flow For the year Ended Dec. 31, 2008 Cash Flow From Operating Activities - Net Income before tax Adjustments To Reconcile Net Income To Net Cash Provided by operating activities - Depreciation - Provisions (Formed during the year) - Trading financial investments evaluation differences - Impairment of assets - Utilization of Provisions (Except Provision for Doubtful Debts) - Provisions No Longer required - FCY Revaluation Differences of Provisions Balances (Except Doubtful Debts) - Gains From Selling Fixed Assets - Profit From Selling Financial Investments - Profits From Selling an investment in Subsidiary - Goodwill Impairment - FCY Revaluation Diff.of Long Term Loans - Share based payments Operating Profits Before Changes in- Operating Assets & Liabilities Net Decrease (Increase) in Assets - Due From Banks - Treasury Bills and other Governmental Notes - Trading financial Investments - Financial Derivatives (Net) - Loans & Overdrafts - Debit Balances & Other Assets Net Increase (Decrease) In Liabilities - Due to Banks - Customers Deposits - Credit Balances & Other Liabilities - Income tax paid Net Cash Provided from Operating Activities Dec. 31, 2008 EGP Dec. 31, 2007 EGP (Restated) 1,616,419,056 1,471,692,072 157,078,362 410,519,381 88,799,961 33,733,620 (11,957,034) (165,739,690) 518,328 (5,052,568) (227,427,627) (50,258,991) 183,698,000 (922,993) 57,568,319 122,518,015 250,988,033 (8,210,793) - - (7,036,600) (1,904,981) (1,269,870) (174,663,447) (148,393,558) - 1,733,674 29,159,584 2,086,976,124 1,534,612,129 9,556,516,685 (7,358,853,097) (46,594,530) (55,834,978) (6,220,116,065) (9,204,729) (2,149,619,156) 9,313,976,968 618,321,121 (155,475,345) 5,580,092,998 (7,961,652,630) 2,268,535,711 225,460,301 (12,141,070) (3,054,288,046) (213,637,494) 1,166,089,258 7,875,825,643 (85,419,369) (80,317,367) 1,663,067,065 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 99 Dec. 31, 2007 EGP (Restated) 15,148,088 (284,632,707) 378,390,172 1,119,236,499 (117,495,626) 1,110,646,426 60,455,684 (310,359,381) (249,903,697) 2,523,809,795 4,355,564,286 6,879,374,081 4,953,205,430 13,883,232,505 2,951,621,063 (13,265,167,463) (1,643,517,454) Commercial International Bank (Egypt) S.A.E. Consolidated Cash flow For the year Ended Dec. 31, 2008 Cash Flow From Investing Activities - Sale (Purchase) Of Subsidiaries & Associated Companies - Purchase of Fixed Assets , Premises and Fitting out of Branches - Redemption Of Held to Maturity Financial Investments - Available For Sale Financial Investment - Financial Investments in Subsidiary (Goodwill) Net Cash (Used in ) Provided From Investing Activities Cash Flow From Financing Activities - Increase (Decrease) in Long - Term Loans - Dividends Paid Net Cash (Used in) Financing Activities Net cash & cash equivalent changes - Beginning Balance of cash & cash equivalent Cash & Cash Equivalent Balance At the End of the year Cash & Cash Equivalent are Represented as Follows : - Cash and Due from Central Bank - Due from Banks - Treasury Bills and other Governmental Notes - Due from Banks (Time Deposits) - Treasury Bills with maturity more than three months Dec. 31, 2008 EGP (2,208,667) (198,887,584) (237,369,108) (211,077,065) (621,580,409) (1,271,122,833) (51,159,293) (346,045,692) (397,204,985) 3,911,765,180 6,879,374,081 10,791,139,261 6,493,360,095 4,551,845,285 12,456,955,210 (3,708,650,777) (9,002,370,552) Total Cash & Cash Equivalent 10,791,139,261 6,879,374,081 - - - - - - - - - - - - - - - - - - 9 9 1 , 5 1 4 , 5 6 3 , 1 ) 3 4 5 , 7 7 1 , 5 ( 2 4 7 , 2 9 5 , 0 7 3 , 1 - - - ) 2 9 6 , 5 4 0 , 6 4 3 ( ) 7 4 2 , 8 3 3 , 3 ( ) 5 4 4 , 7 0 7 , 2 4 3 ( - 4 9 2 , 7 2 9 , 4 ) 4 9 2 , 7 2 9 , 4 ( 8 6 8 , 3 7 4 , 5 6 3 6 1 8 , 3 5 9 , 6 4 2 5 0 , 0 2 5 , 8 1 3 - ) 6 7 5 , 8 8 8 , 1 8 ( 9 1 3 , 8 6 5 , 7 5 ) 4 2 3 , 1 6 4 ( - - - - - ) 6 7 5 , 8 8 8 , 1 8 ( ) 4 2 3 , 1 6 4 ( 9 1 3 , 8 6 5 , 7 5 9 1 3 , 8 6 5 , 7 5 - - - - ) 0 0 5 , 0 8 3 , 3 5 ( - - - - - ) 7 0 3 , 5 8 6 , 5 9 8 ( 2 4 7 , 2 9 5 , 0 7 3 , 1 - ) 7 4 5 , 9 0 7 , 6 3 3 ( - - - - - ) 6 7 5 , 8 8 8 , 1 8 ( - - - - - - - - - - - - - ) 8 9 8 , 7 9 9 , 5 ( - 0 0 5 , 0 8 3 , 3 5 - ) 4 2 3 , 1 6 4 ( ) 4 9 2 , 7 2 9 , 4 ( - - - - - - - - - - 1 3 6 , 5 2 7 , 5 1 1 2 4 , 4 9 7 , 2 0 3 - - - - - - - - , 4 3 9 2 8 4 8 4 5 , , 8 6 6 4 6 0 4 3 8 , , ) 0 0 0 0 0 0 5 7 9 ( , , 2 7 8 0 3 2 1 7 3 , - - - - - - - - - , 9 3 6 0 2 6 1 6 , 2 4 0 , 6 3 8 , 5 6 8 , 5 0 8 4 , 8 2 6 , 8 4 2 6 5 , 7 0 2 , 7 1 8 , 5 3 0 9 , 7 2 7 , 6 8 2 4 7 , 2 9 5 , 0 7 3 , 1 ) 5 4 0 , 5 8 9 , 0 2 ( 5 1 3 , 9 0 6 , 3 1 2 3 1 1 , 9 6 0 , 9 9 1 2 4 , 4 9 7 , 2 0 3 , 2 0 6 7 4 5 7 0 4 , , 1 1 5 1 5 8 2 3 4 , & y t i u q E i p h s r e n w o k c o t s * s t n e m t s e v n i . S F A . s t e s s A e l b g n a t n i I l a t o T P G E P G E P G E P G E P G E P G E P G E P G E P G E P G E P G E P G E t s e r e t n I y t i r o n M i i s g n n r a E d e n i a t e R ) P O S E ( n a l p r a e Y e h t f o s t i f o r P . f f i D n o i t a u l a v e R e v r e s e R l a i c e p S i s g n n r a E d e n i a t e R e v r e s e R e v r e s e R l a r e n e G e v r e s e R l a g e L l a t i p a C 7 0 0 2 l s r e d o h e r a h S l a t o T l e e y o p m e r o f e v r e s e R r o f e v r e s e R 8 0 0 2 , 1 3 . c e D d e d n E r a e Y e h t r o f y t i u q E ' l s r e d o h e r a h S n i s e g n a h c f o t n e m e t a t S d e t a d i l o s n o C . . E A S . ) t p y g E ( k n a B l a n o i t a n r e t n I l i a c r e m m o C ) 6 2 8 , 0 0 0 , 7 2 ( 4 8 5 , 9 5 1 , 9 2 - - 3 5 3 , 0 2 1 , 2 7 0 , 3 4 5 8 , 6 1 5 , 2 9 9 4 , 3 0 6 , 9 6 0 , 3 5 8 9 , 1 6 5 , 2 4 1 - 5 8 9 , 1 6 5 , 2 4 1 8 3 3 , 2 8 6 , 4 1 2 , 3 4 5 8 , 6 1 5 , 2 4 8 4 , 5 6 1 , 2 1 2 , 3 - - - 2 5 1 , 3 3 9 , 8 8 2 , 1 6 0 3 , 6 4 7 , 2 6 4 8 , 6 8 1 , 6 8 2 , 1 ) 6 2 8 , 0 0 0 , 7 2 ( - - - 4 3 6 , 8 5 4 , 7 3 0 9 , 9 0 7 , 2 6 1 6 5 1 , 1 2 7 , 9 2 3 2 7 , 5 4 4 , 0 8 6 1 0 , 2 3 3 6 4 2 , 4 8 7 , 1 6 7 5 3 , 4 0 9 , 7 8 9 1 9 , 1 4 0 , 3 6 1 2 0 4 , 5 0 5 , 1 9 ) 2 9 4 , 1 1 4 ( 6 4 8 , 6 8 1 , 6 8 2 , 1 - - - - - ) 6 2 8 , 0 0 0 , 7 2 ( - - - - - - 6 9 3 , 7 6 5 , 0 5 ) 4 0 9 , 5 5 1 , 0 5 ( 4 8 5 , 9 5 1 , 9 2 4 8 5 , 9 5 1 , 9 2 8 4 2 , 4 7 7 , 5 0 5 , 4 0 6 1 , 3 6 2 , 5 8 8 0 , 1 1 5 , 0 0 5 , 4 4 8 5 , 9 5 1 , 9 2 4 5 3 , 5 7 7 , 5 8 2 , 1 1 3 5 , 3 0 9 , 0 6 5 1 3 , 9 0 6 , 3 1 2 8 9 4 , 9 4 3 , 1 4 l s r e d o h e r a h S l a t o T l e e y o p m e r o f e v r e s e R r o f e v r e s e R & y t i u q E i p h s r e n w o k c o t s * s t n e m t s e v n i . S F A . - - - - - - - - s t e s s A e l b g n a t n i I , 4 3 9 2 8 4 8 4 5 , , 2 7 8 0 3 2 1 7 3 , , 0 0 0 0 0 0 0 5 9 1 , , r a e Y e h T i i f o g n n n g e b t a e c n a a B l g n i t n u o c c A g n i t s u d A j f o t c e f f E - - - , 4 3 9 2 8 4 8 4 5 , , 2 7 8 0 3 2 1 7 3 , , 0 0 0 0 0 0 0 5 9 1 , , s t n e m t s u d A j r e t f l A e c n a a B g n n n g e B i i ) x a T r e t f A ( s d r a d n a t S - - - - - - - - - - - - g n i t n u o c c A g n i t s u d A j f o t c e f f E ) x a T r e t f A ( s d r a d n a t S r a e y e h t f o s t i f o r P t e N d e t s u d A j l k c o t s e e y o p m e r o f e v r e s e R e v r e s e r f o t r a p e g a s U * * ) P O S E l i ( n a p p h s r e n w O , 4 3 9 2 8 4 8 4 5 , , 2 7 8 0 3 2 1 7 3 , , 0 0 0 0 0 0 0 5 9 1 , , r a e Y e h T f o d n e e h t t a e c n a l a B 8 4 2 , 4 7 7 , 5 0 5 , 4 0 6 1 , 3 6 2 , 5 8 8 0 , 1 1 5 , 0 0 5 , 4 4 8 5 , 9 5 1 , 9 2 4 5 3 , 5 7 7 , 5 8 2 , 1 1 3 5 , 3 0 9 , 0 6 5 1 3 , 9 0 6 , 3 1 2 8 9 4 , 9 4 3 , 1 4 l a t o T P G E P G E P G E P G E P G E P G E P G E P G E P G E P G E P G E P G E t s e r e t n I y t i r o n M i i s g n n r a E d e n i a t e R ) P O S E ( n a l p r a e Y e h t f o s t i f o r P . f f i D n o i t a u l a v e R e v r e s e R l a i c e p S i s g n n r a E d e n i a t e R e v r e s e R e v r e s e R l a r e n e G e v r e s e R l a g e L l a t i p a C 8 0 0 2 , 0 0 0 0 0 0 0 5 9 1 , , r a e y e h T i f o g n n n g e B i t a e c n a a B l - - , 0 0 0 0 0 0 5 7 9 , - - - - - - - , 0 0 0 0 0 0 5 2 9 2 , , s e v r e s e R o t r e f s n a r T r a e y e h T f o s t i f o r P t e N * e s a e r c n I l a t i p a C s t i f o r p d e t u b i r t s D i e v r e s e R f o t r a P e s r e v e R t i f o r P d e d v d n U i i l k c o t s e e y o p m e r o f e v r e s e R * * ) P O S E l i ( n a p p h s r e n w O x a T e m o c n I n O t n e m t s u d A j i s g n n r a E d e n a t e R n i i e r a h S y t i r o n M i l i s t e s s A e b g n a t n I n I e k a t S y t i r o a m A j r a e y e h T f O d n E e h T t A e c n a l a B ) 3 2 ( r e b m u n e t o n o t r e f e R * ) 1 3 ( r e b m u n e t o n o t r e f e R * * Commercial International Bank (Egypt) S.A.E. Notes to the Consolidated Financial Statements For the Financial year from January 1, 2008 to December 31, 2008 (1) Organization and Activities a) Commercial International Bank (Egypt) S.A.E. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 101 Commercial International Bank (Egypt) S.A.E. was formed as a commercial Bank on August 7, 1975 under the Investment Law No. 43 for 1974. The Bank is licensed to carry out all commercial banking activities in Egypt through its Head Office and one hundred & five branches, in addition to forty eight units. b)CI Capital Holding Co S.A.E. It was formed as a joint stock company on April 9th, 2005 under the capital market law no. 95 for 1992 and its executive regulations. Financial register no. 166798 on April 10th, 2005 and the company has been licensed by the capital market authority to carry out its activities under license no. 353 on May 24th, 2006. As of December 31, 2008 the bank directly owns 54,988,000 shares representing 99.98% of CI Capital Holding Company’s capital and on December 31, 2008 CI Capital Holding Co. directly owns the following shares in its subsidiaries: Company Name No. of Shares Ownership% Indirectly Share% CIBC Co. CI Assets Management CI Investment Banking Co. CI For Research Co. Dynamic Brokerage Co. United Brokerage Co. - Dubai 539,880 445,499 448,500 448,500 3,392,000 5,000,000 89.98 89.09 89.70 89.70 99.91 49.00 89.96 89.07 89.68 89.68 99.89 48.99 (2) Significant Accounting Policies A) Basis of Preparing Financial Statements • The consolidated Financial Statements are prepared in accordance with the Central Bank of Egypt regulations issued on 27th of June 2002 and its amendments issued on December 16, 2008 and in accordance with the related Egyptian laws and regulations regarding to the preparation of these financial statements. • The available for sale investments measurement have been changed as at 1st of January 2008 as explained in note 2 (F) and (G), from the lower of cost (taking into consideration the FX revaluations) or fair value and the differences were reported in “Income Statement” to fair value with changes reporting direct to equity. The reclassification impact appears on the "Statement of Changes in Shareholders Equity" and the "Available-for-Sale Investments". Adjustments related to the previous years have been done retrospectively. • As a result of applying the new regulations, all outstanding derivatives on the 1st of January 2008 have been recognized in the balance sheet and measured at fair value. B) Basis of consolidation Given the increase in the bank's ownership percentage from 50.09% (joint control) to 99.98% (full control) in CI Capital Holding, has been adjusted form proportional consolidated basis which has been used in the previous financial periods up till June 30, 2008. Consolidated Financial Statements are Consisting of the Financial Statements of Commercial International Bank and Consolidated Financial Statements of CI Capital Holding and it's subsidiaries. The control is achieved through the bank's ability to control the financial and operational policies of the invests in order to obtain benefits from its activities . The basis of the consolidation is follows: - - Eliminating all balances and transactions between the bank and group companies. - The cost of acquisition of subsidiary companies is based on the company's share in the fair value of assets acquired and obligations outstanding the acquisition date. - Minority shareholders represent the rights of others in subsidiary companies. - Proportional Consolidation is used in consolidating method companies under joint control C) Transactions in Foreign Currencies • The Accounting records of the bank are maintained in Egyptian pounds. Transactions in foreign currencies conducted during the year are recorded at the foreign exchange rates prevailing at the time such transactions take place. • Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing at the balance sheet date. Currency translation differences on all monetary financial assets and liabilities are reported in the income statement in the following items:- - Net trading income or net income arising from financial instruments originally recorded at fair value through profit and loss and financial assets and liabilities held for trading or originally recorded at fair value through profit and loss. - Other operating income (loss) for the other items. • The changes in fair value arising from monetary financial instruments classified as foreign investments available for sale (Debt Instruments) should be segregated to revaluation differences arising from changes in the instrument amortized cost to be recorded in "income from loans" and differences arises from foreign exchange rate changes to be recorded in "other operating income" and differences arises from change in fair value to be recorded in "fair value reserve for available for sale investments". • Translation differences on non-monetary items (such as equities) held at fair value through income are also reported through income statement whereas for those classified as available-for-sale are recorded directly in equity within ‘Net unrealized gains and losses on available-for-sale assets’ item. D) Realization of Income • The bank applies the accrual basis in recording interest received from Loans & Overdrafts, Due from Banks, Treasury Bills, Reverse Repose and Bonds. Interest on past due Loans & Overdrafts are not recorded on the income statement. Dividends income is recognized when declared. E) Operating revenues in the holding company: • The activities income of the subsidiaries companies comes as soon as the related service is done, the services are : - Consultancy services to the group before the acquisition date. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 103 - Management fees as follows: 1- Mutual funds & investment portfolios management fees: - The Management fee is calculated as a percentage of the net value of assets under management according to the agreement’s terms and conditions. These amounts are credited to the assets management company’s revenue pool on a monthly accrual basis. - Commission is calculated, based on certain ratios of mutual fund’s net asset value, for the valuation of mutual fund’s assets. This valuation commission is calculated and accrued on a daily basis. 2- Performance fees: - Performance fees calculated by specific ratios from customers portfolios annual return in case of it exceeds a specific return based on the contract terms and is calculated based on the return on the net assets. Such fees are excluded from revenues unless they meet the booking terms. F) Treasury Bills • Treasury Bills are recorded at face value. The issuance discount is recorded in Other Liabilities and deducted from the Gross Treasury Bills balance on the Balance Sheet, which are measured at amortized cost using the effective interest rate. G) Financial Assets Designated at fair value through profit and loss: • Consists of financial assets held for trading & financial assets that the bank upon initial recognition designates to be measured at fair value with changes reported in profit and loss. • Financial instruments held for trading are those that the Bank holds primarily for the purpose of short-term profit-taking or if it represents a part of specified financial instruments portfolio and there is an evidence of short-term profit-taking. Also derivatives are classified as held for trading unless the derivatives are qualified under hedging accounting. • Financial assets designated at fair value through profit and loss are recognized when it relates to an investment portfolio that are managed and evaluated on a fair value basis according to the investment strategies and the risk management and have been reported to the senior management according to that basis. • Any financial derivative or instrument that designates to be measured at fair value with changes reported in income is not reclassified either during the holding period or if it is initially recognized at fair value with changes reported to profit and loss. • At all circumstances the bank does not reclassify any financial instrument to financial instrument measured at fair value with changes reported to profit and loss or to financial assets held for trading. H) Held to Maturity Investments • Held to Maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the bank management has the ability and the positive intent to hold it for the foreseeable future or maturity. Any sales of a significant amount not close to their maturity - except the emergency cases - would result in the reclassification of all held to maturity investments as available-for-sale. I) Available-for-sale Investments • Non-derivative assets that have either been designated as available for sale or do not fit into one of the categories described above. Equity investments held without significant influence, which are not held for trading or elected to fair value through income, are classified as available- for-sale. J) Financial Assets • For the assets classified at fair value through P/L ,held to maturity investments and available for sale investments buying and selling operations are recognized as usual on the trade date which is the date that the bank is committed to buy or sell the financial asset. • A financial asset that does not originally classify at fair value through P/L is initially recognized at fair value plus transaction costs. A financial asset that is originally classified at fair value through P/L is initially recognized at fair value only and the transaction costs are transferred to P/L in “Net income from trading activities”. • Derecognized when the rights to receive cash flows have expired or the Bank has transferred substantially all the risks and rewards of ownership. • Available for sale investments and financial assets designated at fair value through P/L are subsequently held at fair value whereas held to maturity investments are measured at amortized cost using the effective interest rate method. • Gains and losses arising from changes in the fair value of available-for-sale assets should be recognized directly in equity, through the statement of changes in equity, until the financial asset is sold, collected, or otherwise disposed of, at which time the cumulative gain or loss previously recognized in equity should be recognized in profit or loss. • Monetary assets’ interest income is recognized based on the amortized cost method in the income statement. The foreign currency revaluations differences related to available for sale investments are recognized in the income statement. Available for sale equity instruments related dividends are recognized in the income statement when they declared. • Fair values are obtained from quoted market prices in liquid markets. Where no active market exists, or quoted prices are unobtainable, the fair value is estimated using a variety of valuation techniques - including discounted cash flow and other pricing models. Inputs to pricing models are generally market-based when available and taken from reliable external data sources. If the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed, an entity may measure the equity instrument at cost minus any impairment losses. • Debt instruments can be reclassified from the available for sale investments to held to maturity investments at fair value when the bank has the intention and ability to hold to maturity. Any related Profits and losses that was previously recognized in equity are treated as follows: - Financial assets with fixed or determinable payments and fixed maturity valued at amortized cost, using the effective interest method in case of impairment the profits & losses that has been previously recognized directly in equity is removed from equity and recognized in the income statement. - Profits & losses related to financial assets without fixed or determinable maturity are held in equity till selling or dispose the asset then removed from equity and recognized in the income statement. In case of impairment the profits & losses that has been previously recognized directly in equity is removed from equity and recognized in the income statement. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 105 K) Investments in Associated Companies and Jointly controlled Companies: • These investments are evaluated at cost and in case of downfall of its fair value; the book value of each investment is adjusted by such downfall and charged to “Other investments evaluation difference” in the income statement. In case of an increase in the fair value, such increase will be added to the same category in the income statement within the limit of the amounts previously charged. Also investments in jointly controlled companies are evaluated at cost recorded at cost at acquisition and proportionately consolidated in the consolidated financial statement. L) Netting: • Financial assets and liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to set off the recognized amounts and there is an intention to settle on a net basis, or to realize an asset and settle the liability simultaneously. • Treasury Bills Repos & reveres Repos agreements are netted on the balance sheet in “Treasury Bills and other governmental notes”. M) Derivatives & Embedded Derivatives: • Derivatives are measured initially at fair value and subsequently re-measured at fair value. Fair values are obtained from quoted prices prevailing in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and options pricing models as appropriate. All derivatives are included in assets when their fair value is positive and liabilities when their fair value is negative. N) Repos & (Reverse Repos) Transactions: • Repos (Reveres Repos) agreements are eliminated (recorded) on the balance sheet under “Treasury Bills and Other governmental Notes“ whereas its cost (revenue) is recorded in “interest received from treasury Bills & Bonds“ item in Income Statement using the effective interest rate method. O) Impairment of financial assets: O/1) Financial Assets held to maturity: The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or a portfolio of financial assets is impaired. A financial asset or portfolio of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the asset and prior to the balance sheet date ('a loss event') and that loss event or events has had an impact on the estimated future cash flows of the financial asset or the portfolio that can be reliably estimated. Objective evidence that a financial asset or a portfolio is impaired includes observable data that comes to the attention of the Bank about the following loss events: - Significant financial difficulty of the issuer or obligor; - It becomes probable that the borrower will enter bankruptcy or other financial Re-organization. O/2) Available-for-sale Investments: - The Bank assess at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets under available for sale investments or held to maturity investment is impaired. In the case of equity instruments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether impairment exists. P) Intangible Assets: P/1) Goodwill: - Goodwill is capitalized and represents the excess of the cost of an acquisition over the fair value of the Bank’s share of the acquired entity’s net identifiable assets at the date of acquisition. For the purpose of calculating goodwill, the fair values of acquired assets, liabilities and contingent liabilities are determined by reference to market values or by discounting expected future cash flows to present value. Goodwill is included in the cost of investments in associated and subsidiaries investments in the Bank standalone financial statements. Goodwill is tested for impairment whereas the income statements are charged by the impairment. Goodwill is allocated over the cash generating units for the purpose of testing the impairment. The cash generating units represent the main segments of the bank. P/2) Other intangible assets: - Other intangible assets that are acquired by the Bank are stated at cost less accumulated amortization and any adjustment for impairment losses. Other intangible assets are comprised of separately identifiable items arising from acquisition of subsidiaries, such as customer relationships, and certain purchased trademarks and similar items. Amortization is charged to the income statement on a straight-line basis over the estimated useful lives of the intangible asset with definite life. Intangible assets with indefinite life are not amortized but they are tested for impairment Q) Non financial assets impairment: • Assets with indefinite life (except for Goodwill) are assessed at each balance sheet date or more frequently, to determine whether there is any indication of impairment. If any such indication exists, the assets are subject to an impairment review. • An impairment loss is recognized whenever the carrying amount of an asset that generates largely independent cash flows or the cash-generating unit to which it belongs exceeds its recoverable amount. The recoverable amount of an asset is the greater of its net selling price and value in use. To calculate value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market rates and the risks specific to the asset. R) Assets Acquired for settlement of Debts: • These Assets are recorded in the Financial Statement under “debit balances & Other Assets“ at cost and in case of a decrease of the fair value of these assets at the Financial Statement date, the difference is charged to the income statement and the increase of the fair value should be credited to the income statement within the limit of amounts charged in previous financial periods. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 107 S) Provision for Doubtful Debts and Contingent Accounts: • Provision for Doubtful Debts is established on the basis of an appraisal of the identified risk for specific loans and contingent accounts in addition to general percentages from one to five according to the basis of appraising the customer’s credit worthiness issued by the central bank of Egypt on 6th of June 2005. • Provision for Doubtful Debts decreases by loans written off and increases by recoveries of loans previously written off. In addition to taking all the necessary legal action required, a continuous follow up is performed for the recovery of all or part of the written-off amounts. T) Contingent Liability Accounts: • Contingent Liability Accounts include transactions in which the Bank is involved as a third party. Such transactions do not represent actual bank’s assets or liabilities at the Financial Statement date. U) Cash & Cash Equivalent: • In the Statement of Cash Flow, the Cash and Cash Equivalent item includes balances of cash and due from Central Bank, current account balances with Banks and Treasury Bills with maturities of three months from acquisition. V) Depreciation and Amortization: • Depreciation of Fixed Assets (except for lands) is calculated on the basis of the estimated useful life of each asset using the straight-line method. • Improvement and renovation expenses for the bank's leased premises are amortized over the period of the lease contract or the estimated useful life whichever is lower. W) Share-based payments to employees: • The Bank engages in equity settled share-based payment transactions in respect of services received from certain of its employees. • The fair value of the services received is measured by reference to the fair value of the shares or equity instruments granted on the date of the grant. The cost of the employee services received in respect of the shares or equity instruments granted is recognized in the income statement over the period that the services are received, which is the vesting period. The fair value of the equity instruments granted is determined using option pricing models, which take into account the exercise price of the instrument, the current share price, the risk free interest rate, the expected volatility of the bank share price over the life of the equity instrument and other relevant factors. Except for those which include terms related to market conditions, vesting conditions included in the terms of the grant. • Are not taken into account in estimating fair value. Non-market vesting conditions are taken into account by adjusting the number of shares or equity instruments included in the measurement of the cost of employee services so that ultimately, the amount recognized in the income statement reflects the number of vested shares or equity instruments. Where vesting conditions are related to market conditions, the charges for the services received are recognized regardless of whether or not the market related vesting condition is met, provided that the non-market vesting conditions are met. X) Taxes: • Income Tax on the profit or loss for the financial year comprises current and deferred tax is recognized in the Income statement. • Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted at the balance sheet date. • Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. • A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. (3) Financial Instruments and their risk management: (3/1)Financial Instruments: A) The bank's financial instruments are represented in the financial Assets and Liabilities. The financial assets include cash, due from banks, investments and loans to customers and banks. The financial liabilities include customers' deposits, due to banks and long-term loans. Financial investments also include rights and obligations stated under " contingent liabilities and commitments " Note No. (2) Of the notes to the financial statements includes the accounting policies applied to measure and recognize significant financial instruments and the revenues and expenses related thereto. B) Forward Contract: • According to Central Bank of Egypt instruction the bank doesn’t execute deferred contracts except to the necessary limit of short term transaction to cover its requirements of Foreign currencies or the bank’s customers’ requirements to fulfill their obligations resulting from short-term transactions. (3/2)Risk Management: A) Interest rate risk: The value of some financial instruments fluctuates due to the fluctuation in interest rates related thereto. The bank follows some procedures to minimize this risk such as: • Correlating between the interest rates on borrowing and lending. • Determining interest rates in consideration with the prevailing discount rates on various currencies. • Monitoring the maturities of financial assets and liabilities with its related interest rates. Notes No. (32 & 33) of the notes to the Financial Statements disclose maturities of the assets and liabilities and the average interest rates applied to assets and liabilities during the period. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 109 B) Credit risk: Loans to customers and Banks ,financial Investments (Bonds), due from banks, rights and obligations from others, are financial assets exposed to credit risk which result in these parties’ inability to repay in part or in full the loan granted to them at maturity. The bank adopted the following procedures to minimize the credit risk: • Preparing credit studies about the customers before dealing with them and determining credit risk rates related thereto. • Obtaining adequate guarantees to reduce the risks resulting from insolvency of customers. • Monitoring and preparing periodic studies about customers in order to evaluate their financial and credit positions and estimate the required provisions for non - performing loans. • Distribution of loans portfolio and due from banks over various sectors to avoid concentration of risk. Note No. (35) Discloses the distribution of loans portfolio over various sectors. C) Foreign Currency Risk: • The nature of the bank’s activity requires the bank to deal in many foreign currencies which expose the bank to the risk of fluctuation in exchange rates. To minimize this risk, the bank monitors the balances of foreign currency positions according to Central Bank of Egypt instructions in that respect. Note No. (36) Of the financial statements discloses significant foreign currency positions at the balance sheet date. (4) Accounting estimates and assumptions: - The preparation of financial statements requires management to make subjective judgments and estimates, at times, regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures. Those judgments and estimates are based on historical experience and other factors containing the expectations of the future events that are reasonable estimated in accordance of the available conditions & information. - The most significant areas requiring management to make judgments and estimates that affect reported amounts and disclosures are as follows: A) Impairment of the available for sale equity instruments: • In the case of available for sale equity instruments, a significant or Continuous decline in the fair value of the security below its cost is considered as impairment. Where such evidence exists, significant or Continuous decline needs a personal judgment. To make this judgment the bank assesses-besides other factors-the common share price volatility. In addition, impairment exists when there is objective evidence that a certain company has a financial difficulty in its cash flow from operating and financing activities, industry tool or sector or technological advances. • If each significant or Continuous decline in the fair value of the security below its cost is considered, the bank will charge an additional loss of EGP 20,312,399 represents transferring all the fair value reserve to P/L. B) Derivatives’ Fair Value: • For the unquoted financial instruments, the fair value is determined using a variety of valuation techniques which are tested and reviewed periodically by high qualified staffs that are independent of those who created the models. The models used are validated prior put into use. Inputs to pricing models are generally market-based when available and taken from reliable external data sources. While areas like the bank credit risk, counterparties, volatility and correlations require management to make judgments & estimations. Changes in the assumptions related to these factors may affect the financial instruments fair values which have been disclosed. C) Held to maturity Investments: • Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held to maturity. This category requires personal judgment therefore the bank tests whether there is a genuine intent and ability to hold such investments to maturity. If the bank fails to hold such investments till maturity (except for certain tightly defined circumstances such as if an entity sells an insignificant amount of held- to-maturity investments close to maturity date), investments should be reclassified as available-for-sale, which will be measured at fair value instead of amortized cost. • In case of having the held to maturity portfolio tainted, the book value of the portfolio will decrease by EGP 54 035 585 to reflect the fair value through debiting the fair value reserve within equity. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 111 Dec. 31, 2007 EGP 1,081,319,202 1,996,073,908 1,875,812,320 4,953,205,430 Dec. 31, 2007 EGP 7,391,521,850 7,391,521,850 109,010,305 155,948,928 264,959,233 509,054,737 5,717,696,684 6,226,751,421 Dec. 31, 2008 EGP 1,085,954,242 3,387,059,358 2,020,346,495 6,493,360,095 Dec. 31, 2008 EGP 400,757,450 400,757,450 214,459,971 321,186,900 535,646,871 628,734,537 2,986,706,427 3,615,440,964 5- Cash And Due From Central Bank - Cash & Cash Items - Reserve Balance with CBE (A) Current Accounts (B) Time Deposits Total Cash & Due From Central Bank 6- Due from Banks (A) Central Bank - Time Deposits Total Due from central bank (B) Local Banks - Current Accounts - Time Deposits Total Due from Local Banks (C) Foreign Banks - Current Accounts - Time Deposits Total Due From Foreign Banks Total Due From Banks 4,551,845,285 13,883,232,504 7- Treasury Bills and other Governmental Notes - 91 Days Maturity - 182 Days Maturity - 364 Days Maturity - Unearned Income Total Reverse Repos Grand Total Dec. 31, 2008 EGP 3,515,475,000 1,960,250,000 5,627,175,000 11,102,900,000 (612,767,361) 10,490,132,639 1,966,822,571 12,456,955,210 Dec. 31, 2007 EGP 1,313,750,000 751,830,445 970,750,000 3,036,330,445 (84,709,382) 2,951,621,063 - 2,951,621,063 8- Financial Assets For Trading Debt Instruments - Government Bonds - Other Debt Instruments Total Debt Instruments Equity Instruments - Foreign Company Shares - Mutual Fund Total Equity Instruments Dec. 31, 2008 EGP 101,369,914 188,849,738 290,219,652 59,440,478 291,967,300 351,407,778 Dec. 31, 2007 EGP 51,603,627 64,370,759 115,974,386 102,842,451 465,016,024 567,858,475 Total Financial Assets For Trading 641,627,430 683,832,861 9- Financial Investment Financial Investment Available for Sale - Debt Instruments Listed - Fair Value - Equity Instruments Listed - Fair Value - Unlisted Instruments Total Financial Investment Available for Sale (1) Financial Investment Held to Maturity Debt Instruments - Listed - Unlisted Total Financial Investment Held to Maturity (2) Total Financial Investment (1+2) Listed Balances Unlisted Balances Total Fixed Interest Debt Instruments Variable Interest Debt Instruments Total Dec. 31, 2008 EGP 1,921,272,094 244,823,746 608,869,410 2,774,965,250 306,374,803 374,888,471 681,263,274 3,456,228,524 2,472,470,643 983,757,881 3,456,228,524 1,832,967,710 769,567,658 2,602,535,368 Dec. 31, 2007 EGP 1,462,208,120 291,333,688 600,321,126 2,353,862,934 311,494,817 132,399,349 443,894,166 2,797,757,100 2,065,036,625 732,720,475 2,797,757,100 1,339,637,012 566,465,274 1,906,102,286 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 113 Total 4,000,447,850 1,821,267,363 (3,037,672,306) (38,933,733) 56,833,304 (4,185,378) 2,797,757,100 2,797,757,100 11,672,753,135 (10,885,257,036) (6,576,438) (81,995,801) (40,452,436) 3,456,228,524 Dec. 31, 2007 EGP 123,416,664 (29,016,847) (16,056,744) 148,393,558 Opening Balance 1/1/2007 Addition Deduction (Selling - Recovery) Financial Investment Available for Sale 3,178,163,512 1,821,267,363 (2,673,473,661) Differences in revaluation of the Cash Assets in Foreign Currencies (24,742,206) Profit from Fair value Differences Deduct - Impairment Losses Ending Balance 31/12/2007 Opening Balance 1/1/2008 Addition Deduction (Selling - Recovery) Differences in revaluation of the Cash Assets in Foreign Currencies Profit from Fair value Differences Deduct - Impairment provision Ending Balance 31/12/2008 56,833,304 (4,185,378) 2,353,862,934 2,353,862,934 11,159,837,393 (10,611,700,507) (7,219,107) (81,995,801) (37,819,662) 2,774,965,250 Profit (Losses) from Financial Investment Profit (Losses) from selling Available for Sale Financial Instruments Losses from Impairment of Equity Instruments Available for Sale (Losses) From Available for Sale Debt Instruments Reverse of Impairment Profit (Losses) from Selling Investments in Subsidiaries and associates. Financial Investment Held to Maturity 822,284,338 - (364,198,645) (14,191,527) - - 443,894,166 443,894,166 512,915,742 (273,556,529) 642,669 - (2,632,774) 681,263,274 Dec. 31, 2008 EGP 119,846,433 (47,618,230) (7,219,106) 44,303,152 Total 109,312,249 226,736,631 An Amount Of EGP 207,246,166 Classified as of Held To Maturity Investment Instead Of Available For Sale Investment 10- Other Operating Income Profits (Losses) From Assets & Liabilities Revaluation Except Trading Profits (Losses) From Selling Equipments And Fixed Assets Recovery From Other Provisions Others Dec. 31, 2008 Dec. 31, 2007 EGP 8,676,929 5,052,568 165,739,690 (83,127) 179,386,060 EGP 13,181,723 1,269,870 - (9,183,838) 5,267,755 11- Loans and Overdrafts - Discounted Bills - Loans & Overdrafts to Customer - Loans & Overdrafts to Banks - Unearned Bills Discount - Provision For Doubtful Debts - Interest in suspense Net Loans & Overdrafts 12- Provision For Doubtful Debts Dec. 31, 2008 - Balance at Beginning of The year - Formed During The year - Recoveries from Written Off Debts - Foreign Currency Revaluation Diff. - Usage During The year Dec. 31, 2008 Dec. 31, 2007 EGP 795,836,842 26,867,609,401 344,498,810 28,007,945,053 (119,310,349) (1,408,297,328) (150,009,498) 26,330,327,878 Specific EGP 491,530,222 175,941,000 63,759,860 5,054,571 736,285,653 (96,061,356) EGP 369,367,153 20,979,609,432 501,437,453 21,850,414,038 (33,299,487) (1,089,969,238) (248,554,472) 20,478,590,841 General EGP 598,439,016 169,634,015 - - 768,073,031 - Total EGP 1,089,969,238 345,575,015 63,759,860 5,054,571 1,504,358,684 (96,061,356) Balance at The End of The year 640,224,297 768,073,031 1,408,297,328 Dec. 31, 2007 - Balance at Beginning of The Year - Formed During The year - Recoveries from Written Off Debts - Foreign Currency Revaluation Diff. - Usage During The Year - Transferred from Specific to General Provision Specific EGP 551,958,000 91,524,201 44,472,711 (8,580,249) 679,374,663 (177,835,496) (10,008,945) General EGP 486,950,021 101,480,050 - - 588,430,071 - 10,008,945 Total EGP 1,038,908,021 193,004,251 44,472,711 (8,580,249) 1,267,804,734 (177,835,496) - Balance at the end of the Year 491,530,222 598,439,016 1,089,969,238 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 115 13- Financial Derivatives The bank uses the following financial derivatives for non hedging purposes. * Forward contracts represents commitments of buying foreign and local currencies including unexecuted spot transactions. Future contracts for foreign currencies and/or interest rates represents contractual commitments to receive or pay net amount on the basis of changes in foreign exchange rates or interest rates, and/or buying or selling foreign currencies or financial instruments in a future date with a fixed contractual price under active financial market. * Credit risk is considered low, and future interest rate contracts represents future exchange rate contracts negotiated for case by case, these contracts requires financial settlements of any differences in contractual interest rates and prevailing market interest rates on future dates based on contractual amount (nominal value) pre agreed upon. * Foreign exchange and/or interest rate swap represents commitments to exchange cash flows, resulting from these contracts exchange of currencies or interest (fixed rate versus variable rate for example) or both (meaning foreign exchange and interest rate contracts)/ contractual amounts are not exchanged except for some foreign exchange contracts * Credit risk is represented in the expected cost of foreign exchange contracts that takes place if other parties default to fulfill their liabilities. This risk is monitored continuously through comparisons of fair value and contractual amount, and to control continuously through comparisons of fair value and contractual amount, and to control the outstanding credit risk, the bank evaluates other parties using the same methods as in borrowing activities. * Options contracts in foreign currencies and/or interest rates represents contractual agreements for the buyer (issuer) to seller (holders) as a right not an obligations whether to buy (buy option) or to sell (sell option) at a certain day or within certain period for a certain amount in foreign currency or interest rate. Options contracts are either traded in the market or negotiated between the bank and one of its client (Off balance sheet). The bank exposed to credit risk for purchased options contracts only and in the line of its book cost which represent its fair value. * The contractual value for some derivatives options considered a base to compare the realized financial instruments on the balance sheet, but it didn’t provide indicator on the projected cash flows of the fair value for current instruments, those amounts doesn’t reflect credit risk or interest rate risk. * Derivatives in the banks benefit represent (assets) conversely it represents (liabilities) as a result of the changes in foreign exchange prices or interest rates related to these derivatives. Contractual / expected total amounts of financial derivatives can fluctuate from time to time and also the range through which the financial derivatives can be in benefit of the bank or conversely against its benefit and the total fair value of the financial derivatives in assets and liabilities. Hereunder are the fair values of the booked financial derivatives. For Trading Derivatives Foreign Derivatives Amount Assets Liability Amount 2008 2007 Assets - Forward Foreign exchange contracts 2,572,060,181 31,916,357 31,680,875 3,603,088,630 9,729,116 Liability 8,983,093 - Currency swap - Options Total Derivatives (1) Interest rate derivatives - Interest rate Swaps Total Derivatives (2) Commodity Total Derivatives (3) Total Assets (liability) For Trading Derivatives (1+2+3) 3,457,152,333 65,087,047 57,539,919 4,095,848,478 25,528,958 51,068,349 112,099,475 1,080,796 1,080,796 8,018,830 13,753 13,753 98,084,200 90,301,590 - 35,271,827 60,065,195 1,730,052 63,646,403 63,646,403 3,452,965 3,452,965 1,728,760,514 40,036,006 40,036,006 3,101,568 3,101,568 1,235,414,832 543,160,189 543,160,189 543,160,189 543,160,189 - - 704,890,792 636,914,744 75,307,833 63,166,763 14- Financial Investments in Associated Companies Dec. 31, 2008 % Dec. 31, 2007 - Contact for Cars Trading - Commercial International life insurance co. - Corplease co. - Cotecna Trade Support - Haykala For Investment - Egypt Factors - International. Co. for Appraisal & Collection. - International Co. for Security & Services ( Falcon ) The Financial Investments in Associated companies are represented as follows :- - Financial Investments listed in Stock Exchange - Financial Investments Unlisted in Stock Exchange 15- Capital Commitments : A) Commercial International Bank - Financial Investments 45 40 39 47.5 39 40 40 EGP - 44,520,250 32,000,000 48,750 602,500 10,751,715 1,000,000 4,000,000 92,923,215 - 92,923,215 92,923,215 EGP 31,000,000 32,000,000 18,400,000 48,750 601,252 3,763,646 400,000 4,500,900 90,714,548 - 90,714,548 90,714,548 % 38.4 40 40 39 47.5 39 40 45 The Capital Commitments For The Financial Investments Reached On The Date Of balance Sheet EGP198,681,919 as follows :- Available for Sale Financial Investments Financial Investments in associates Co. - Fixed Assets & Branches Constructions Investments value EGP 611,775,824 1,395,000 Paid EGP Remaining EGP 413,840,156 197,935,669 648,750 746,250 The value of Commitments for the purchase of fixed assets contracts and branches constructions that have not been implemented till the date of financial statement amounted to EGP 4,904,068 B) CI Capital Holding Co. CI Capital Holding Co. assigned One of The Biggest Contractors Companies to Held a Premises in Smart Village with Total Budget EGP 37,184,572 And It Will Be Finished After 16 Months Started in 23 April 2008 And The Co. Paid 20% From The Total Budget and the value of work performed as of the date of the Balance Sheet amount EGP 8,420,566. As a Down Payment Against Unconditioned Irrevocable Bank Letter Of Guarantee. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 117 Dec. 31, 2008 Dec. 31, 2007 EGP 398,537,508 57,238,848 118,184,293 52,165,659 346,728,856 - 972,855,164 - 972,855,164 EGP 460,502,319 54,175,157 204,935,394 29,361,646 288,214,383 241,625,336 1,278,814,235 (243,638,021) 1,035,176,214 16- Debit Balances and Other Assets Accrued Revenues Prepaid Expenses Advances for Purchase of Fixed Assets Assets Acquired as Settlement of Debts * Accounts receivable & Other Assets *** Accrued Balances of Customers Loans ** Deduct Provision for General & Insurance Risk ** Total Debit Balances and Other Assets * This Include The Value Of Premises That Was Not Recorded Under The Bank's Name By EGP 32,682,053 Which Were Acquired Against Settlement Of The Debts Mentioned Above, In The SameTime The Legal Procedures Are Under Process To Register Or Sell These Assets Within The period required by law. ** These Balances Carried Forward From Previous Year Represent Certain Advances To Customers That Were Made At One Of The Branches In Violation Of The Bank's Standard Operating Procedures For Facilities Policies, Resulting In Reclassifying These Balances Under other Debit Balances Conservative Provisions Were Adequately Reallocated From Other Provisions To Meet The Relevant Operation Risk *** Include EGP 15,955,151 as Assets Held For Sale. 17- Net Fixed Assets (Net of Accumulated Depreciation) Land EGP Premises EGP IT EGP Vehicles Fitting -Out Equipment Furnishing EGP EGP EGP EGP Total EGP Dec. 31, 2008 Machines & Furniture & Opening Balance (3) 63,793,260 298,200,192 411,682,566 22,539,347 139,643,839 171,048,907 81,302,725 1,188,210,836 Additions (Deductions) During The year 13,276,188 35,162,427 119,067,190 2,459,093 50,089,658 49,762,116 20,053,455 289,870,127 Closing Balance (1) 77,069,448 333,362,619 530,749,756 24,998,440 189,733,497 220,811,023 101,356,180 1,478,080,963 Accu. Depreciation at Beginning of The year (4) Current year Depreciation Accu. Depreciation at end of The year (2) - - - 91,389,674 250,320,234 18,320,122 88,854,558 84,320,370 34,766,996 567,971,954 15,144,584 75,606,602 2,553,138 33,149,425 24,068,975 11,245,583 161,768,307 106,534,258 325,926,836 20,873,260 122,003,983 108,389,345 46,012,579 729,740,261 End of year Net Assets (1-2) 77,069,448 226,828,361 204,822,920 4,125,180 67,729,514 112,421,678 55,343,601 748,340,702 Beginning of year Net Assets (3-4) 63,793,260 206,810,518 161,362,332 4,219,225 50,789,281 86,728,537 46,535,729 620,238,882 Depreciation rates 5% 20% 20% 33.3% 12.5% 10% * Net fixed assets value on the Balance Sheet date includes EGP 73,303,957 non registered assets while their registrations procedures are in process. 18- Due to Banks (a) Central Bank - Current Accounts - Time Deposits Total Due to Central Bank (b) Local Banks - Current Accounts - Time Deposits Total Due to Local Banks (c) Foreign Banks - Current Accounts - Time Deposits Total Due to Foreign Banks Dec. 31, 2008 EGP 75,056,264 - 75,056,264 34,833,336 - 34,833,336 116,257,050 2,847,572 119,104,622 Dec. 31, 2007 EGP 80,028,494 2,012,792,500 2,092,820,994 26,463,751 28,480,310 54,944,061 199,834,891 31,013,432 230,848,323 Total Due to Banks 228,994,222 2,378,613,378 19- Customers' Deposits - Demand Deposits - Time & Notice Deposits - Saving & Deposit Certificates - Saving Deposits - Other Deposits Total Customer Deposits 20- Credit Balances and Other Liabilities - Accrued Interest Payable - Accrued Expenses - Accounts Payable - Due to Associated & Subsidiaries Companies - Other Liabilities Total Credit Balances And Other Liabilities Dec. 31, 2008 EGP 12,978,489,163 19,946,553,875 7,395,350,361 7,316,052,948 1,153,583,462 48,790,029,809 Dec. 31, 2007 EGP 11,566,831,688 13,612,928,991 5,948,726,982 6,517,256,544 1,830,308,636 39,476,052,841 Dec. 31, 2008 Dec. 31, 2007 EGP 208,568,878 63,085,571 916,240,507 - 41,385,402 1,229,280,358 EGP 176,020,513 34,419,303 489,355,989 13,323,760 46,559,386 759,678,951 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 119 21- Long Term Loans - F.I.S.C. - K.F.W - UNIDO Rate % Maturity date Due through Balance as of Balance as of 7 9-10.5 1 3-5 years 10 years 2011 next year EGP 12,000,000 6,935,659 517,480 Dec. 08 EGP Dec. 07 EGP 30,439,600 40,565,200 16,010,946 15,195,955 847,580 8,038,908 - Ministry of Agriculture (F.S.D.P) 3.5 - 5.5 3-5 years 41,884,205 58,804,557 92,594,906 depends on maturity date 3.5 - 5.5 depends on maturity date 3-5 years 65,000 125,000 10,000 3 months T/D 2010 1,560,000 3,046,250 4,951,250 or 9% which more 62,962,344 109,273,933 161,356,219 - Ministry of Agriculture (V.S.P) - Social Fund Total 22- Other Provisions Opening Balance Formed FCY Balance Usage Balance Closing During the year Reval. Difference During the year No Longer Required Balance Dec. 31, 2008 EGP - Provision for Income Tax Claims 229,198,246 - Provision for Legal Claims - Provision for Contingent - Provision for Other Claim - Provision of end of service bonus 1,123,118 167,036,000 492,272 74,903 7,017,276 487,075 38,760,000 10,213,953 339,610 1,583 (1,194) 517,939 - - (10,264,010) (337,886) - (1,324,265) (30,873) (70,000,000) 155,953,095 - - 1,271,113 206,313,939 (658,511) 8,723,449 383,640 Total Other Provisions 397,924,539 56,817,914 518,328 (11,957,034) (70,658,511) 372,645,236 Opening Balance Formed FCY Balance Usage Balance Closing During the year Reval. Difference During the year No Longer Required Balance Dec. 31, 2007 EGP - Provision for Income Tax Claims 229,198,246 - Provision for Legal Claims 1,126,794 - - - (3,676) - Provision for Contingent 111,524,889 57,412,416 (1,901,305) - Provision for General risk - Provision of end of service bonus 492,272 - - 74,903 - - Total Other Provisions 342,342,201 57,487,319 (1,904,981) - - - - - - - - - - - - 229,198,246 1,123,118 167,036,000 492,272 74,903 397,924,539 23- Shareholders Equity (a) Capital - The Authorized Capital Reached EGP 5000 Million According To The Extraordinary General Assembly Decision On 19,Mar,2006 - Issued And Paid In Capital Reached EGP 2925 Million To Be Divided On 292.5 Million Shares With EGP 10 Par Value For Each Share On 31/07/2008 According To Board Of Directors Decision On 21/02/2008 By Using 975 Million From General Reserve . - The Extraordinary General Assembly Approved In The Meeting Of June, 26,2006 To Activate A Motivating And Rewarding Program For The Bank's Employees & Managers Through Employee Share Ownership Plans (ESOP) By Issuing A Maximum Of 5% Of Issued And Paid-In Capital At Par Value ,Through 5 Years Starting 31,Dec 2006 And Delegated The Board Of Directors To Establish The Rewarding Terms & Conditions And Increase The Paid In Capital According To The Program. (b) Reserves - According To The Bank Statues 5% Of Net Profit Is To Increase Legal Reserve Until Reaches 50% Of The Bank's Issued And Paid In Capital - Concurrence Of Central Bank Of Egypt For Usage Of Special Reserve Is Required . - According To CBE Regulations, A Reserve And Retained earnings Accounts Has Been Formed For Difference Revaluation For Financial Investment (Available For Sale) For Prior Years 24- Contingent Liabilities & Commitments Letters of Guarantee Letters of Credit (Import & Export) Customers Acceptances Dec. 31, 2008 EGP 10,852,854,384 1,933,869,400 504,220,921 Dec. 31, 2007 EGP 8,710,786,948 2,233,007,892 616,046,795 Total 13,290,944,705 11,559,841,635 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 121 Dec. 31, 2007 EGP 3,925,710 1,712,418,676 1,716,344,386 327,029,198 740,531,515 77,368,908 136,792,638 2,998,066,645 69,203,483 1,507,717,820 1,576,921,303 3,579,534 217,342,046 1,797,842,883 Dec. 31, 2008 EGP 5,549,512 2,003,772,928 2,009,322,440 623,807,366 1,024,064,455 49,785,679 58,227,573 3,765,207,513 97,515,593 1,789,342,467 1,886,858,060 6,245,478 73,443,883 1,966,547,421 1,798,660,092 1,200,223,762 Dec. 31, 2008 EGP 277,942,194 (761,507) (1,555,899) 23,259,000 26,932,691 53,231,649 (33,680,387) 345,367,741 Dec. 31, 2007 EGP 153,821,842 (5,101,086) (689,232) 23,386,836 41,353,081 46,663,091 17,287,245 276,721,777 25- Net Interest Income Interest Received from Loans and similar items. Loans & Facilities - Banks - Clients Total - Treasury Bills & Bonds - Deposits & Current Account - Financial Investment In Debt Instruments Held to Maturity & Available for Sale - Other Total Interest Paid on deposits and similar items Deposits & Current Account:- - Banks - Clients Total - Other Loans - Other Total Net 26- Trading Net Profit Foreign exchange operations:- - Profit (Losses)From Foreign exchange - Profits (Losses) from Revaluing Trading Assets & Liabilities in Foreign Currencies - Profit (Losses)From Forward Foreign exchange Deals Revaluation - Profit (Losses)From Interest rate Swap Revaluation - Profit (Losses)From Currency Swap Deals Revaluation - Debt Instruments For Trading - Equity Instruments For Trading Total 27- Comparative Figures As a Result of Changing The Accounting Standards Concerning The Financial Investments, The Bank Has restated the Comparative Figures (as mentioned in note 2 A ) For Some Items In Balance Sheet and Income Statement as Hereunder:- Financial Investment Available For Sale Financial Derivatives Debit Balances Credit Balances Special Reserves Fair Value Reserve (Available For Sale Financial Investment) Retained Earnings Net Trading Income Profits (losses) Financial Investments Income Tax Balance Before Restatement EGP 2,382,992,007 - - 162,709,903 4,870,506 212,982,610 276,290,900 (167,662,101) Balance After Restatement EGP 2,353,862,934 75,307,833 63,166,763 213,609,315 60,903,531 41,349,498 276,721,777 226,736,631 (194,218,288) - The Comparative Figures Are Amended as well To Confirm With The General Assembly Held on 17th Of March, 2008 Decisions, For Ratifying The Appropriation Account Of Year 2007. Comparative figures in the bank's Consolidated Financial Statements are Consisting of the Financial Statements of Commercial International Bank and 50.09 % of Consolidated Financial Statements of CI Capital Holding Company using Proportionate Consolidation therefore the comparative figures can not be directly compared to figures for current year 28- Deferred Tax Assets and Liabilities Recognized Deferred Tax Assets (Liabilities) Deferred Tax Assets And Liabilities Are Attributable To The Following: Deferred Tax - Fixed Assets (Depreciation) - Other Provisions(Excluded Loan Loss & Contingent Liabilities And Income Tax Provisions) - Other Items(Other Investments Revaluation Difference) - Reserve For Employee Stock Ownership Plan (ESOP) Total Deferred Tax Assets(Liabilities) Assets (liabilities) Dec. 31, 2008 EGP Assets (liabilities) Dec. 31, 2007 EGP (28,505,471) 1,998,913 28,533,744 17,345,581 19,372,767 (23,074,328) 48,952,228 20,190,375 5,831,917 51,900,192 CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 123 Dec. 31, 2007 EGP 1,471,692,072 20% 294,338,414 7,578,086 (146,125,178) 26,967,598 182,758,920 12.42% Dec. 31, 2007 EGP 1,286,186,846 (19,292,803) (128,618,685) 1,138,275,358 292,500,000 3.89 294,409,350 3.87 Dec. 31, 2008 EGP 1,616,419,056 20% 323,283,811 67,996,440 (136,173,947) (4,102,447) 251,003,857 15.53% Dec. 31, 2008 EGP 1,370,592,742 (20,558,891) (137,059,274) 1,212,974,577 292,500,000 4.15 295,478,665 4.11 29- Reconciliation of effective tax rate - Profit Before Tax - Tax Rate Income Tax based on accounting profit Add / (Deduct) - Non-Deductible Expenses - Tax Exemptions - Effect Of Provisions Income Tax Effective Tax Rate 30- Earning Per Share - Net Profit For The year - Board Member's Bonus - Staff Profit Sharing - Shareholders' Share In Profits - Number Of Shares - Earning Per Share * By Issuance Of ESOP Shares Earning Per Share Will Be: - Number Of Shares Including ESOP Shares - Diluted Earning Per Share 31- Share-Based Payments: According to the extraordinary general assembly meeting on June 26, 2006, the bank actived a new employees share ownership plan (ESOP) scheme and issued equity-settled share-based payments .Such employees should complete a term of 3 years of service in the bank to have the right in ordinary shares at face value(right to share) that will be issued on the vesting date, otherwise such grants will be forfeited. Equity-settled share-based payments are measured at fair value at the grant date, and expensed on a straight-line basis over the vesting year (3 years) with corresponding increase in equity based on estimated number of shares that will eventually vest.The fair value for such equity instruments is measured by use of Black-Scholes pricing model. Details Of The Rights To Share Outstanding During The year Are As Follows: Outstanding At The Beginning Of The year Granted During The year Forfeited During The year Exercised During The year Expired During The year Outstanding At The End Of The year - The Estimated Fair Value Of The Equity Instrument Granted To The First Tranch Is EGP 45.82 . - The Estimated Fair Value Of The Equity Instrument Granted To The Second Tranch Is EGP 81.18 . Number of Shares 1,909,350 1,276,665 (207,350) - - 2,978,665 32- Assets & Liabilities Maturities Assets - Cash And Due From Central Bank - Due From Banks - Treasury Bills And Other Governmental Notes - Trading Investments - Available For Sale Investments - Customers' Loans & Overdrafts - Banks' Loans & Overdrafts - Held To Maturity Investments - Investments In Associated Companies - Debit Balances And Other Assets Liabilities - Due to Banks - Customer Deposits - Long Term Loans - Credit Balances and Other Liabilities Maturity Within one year Maturity Over One Year 6,493,360,095 4,551,845,285 13,069,722,571 641,627,430 2,774,965,250 14,721,451,328 79,687 20,051,249 - 972,855,164 43,245,958,059 228,994,222 41,376,121,147 62,962,344 1,229,280,358 42,897,358,071 - - - - - 12,791,985,417 344,419,123 661,212,025 92,923,215 - 13,890,539,780 - 7,413,908,662 46,311,589 - 7,460,220,252 33- Interest Rate The Average Interest Rates Applied for Assets and Liabilities During The Year Are 7.21 % & 3.65 % Respectively. 34- Tax Status (A) Commercial International Bank - The Bank's Corporate Income Tax Position Has Been Examined And Settled With The Tax Authority From The Start Up Of Operations Up To The End Of Year 1984. - Corporate Income Tax For The Years From 1985 Up To 2000 Were Paid According To The Tax Appeal Committee Decision And The Disputes Are Under Discussion In The Court Of Law . - The Bank's Corporate Income Tax Position Has Been Examined And Settled With The Tax Authority From 2001 Up To 2004. - Corporate Income Tax For The Years 2005-2006 Will Be Examined From The Tax Authority. - The Bank Pays Salary Tax According To Concerning Domestic Regulations And Laws, And The Disputes Are Under Discussion In The Court Of Law. - The Bank Pay Stamp Duty Tax According To Concerning Domestic Regulations And Laws, And The Disputes Are Under Discussion In The Court Of Law . (B) CI Capital Holding Co. - CI Capital Holding company was established on April 9, 2005 according to the law # 95 for year 1992 & its regulations and as for taxation law the company goes under law # 91 for year 2005 & its regulations. - The company did not receive any tax claim concerning income tax, salaries, and stamp duty. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 125 Local Currency Foreign Currency 642,370,245 3,909,475,039 62,198,759 10,499,496,255 1,375,973,774 11,392,863,009 2,277,076,866 2,400,336,389 28,007,945,052 (119,310,349) (1,408,297,328) (150,009,498) 26,330,327,877 % 0.2 37.5 4.9 40.7 8.1 8.6 100 5.0 Local Currency Foreign Currency 36,118,171 192,876,051 95,133,156 5,762,542,659 1,955,118,330 11,121,318,409 24,711,197,433 5,144,719,822 48,790,029,809 % 0.2 11.8 4.0 22.9 50.6 10.5 100 Local Currency Foreign Currency 3,933,462,215 12,639,451 64,388,766 6,919,392,169 1,921,229,949 439,832,155 35- Distribution of Assets, Liabilities and Contingent Accounts Assets 1- Due From Banks 2- Loans & Overdrafts Agriculture Sector Industrial Sector Trading Sector Services Sector Household Sector Other Sectors Total Loans & Overdrafts (Including unearned interest) Unearned Discounted Bills Provision for Doubtful Debts Unearned Interest & Commission Net Loans & Overdrafts Liabilities 1- Due to Banks 2- Customers' Deposits Agriculture Sector Industrial Sector Trading Sector Services Sector Household Sector Other Sector Total Customers' Deposits Contingent Accounts - Letters Of Guarantee - Letter Of Credit ( Import & Export ) - Customers Acceptances Total 4,010,490,432 9,280,454,273 36- Main Currencies Positions - Egyptian Pound - US Dollar - Sterling Pound - Japanese Yen - Swiss Franc - Euro 37- Mutual Funds (1) Osoul Fund Dec. 31, 2008 Dec. 31, 2007 in thousand EGP in thousand EGP (6,756) 4,714 (3,303) (333) 1,024 15,811 (13,959) (56,955) (389) (377) 821 14,449 - The Bank Established An Accumulated Return Mutual Fund Under License No.331 Issued From Capital Market Authority On 22/02/2005. CI Assets Management Co.- Joint Stock Co Manages The Fund. - The Number Of Certificates Reached 30,647,805 With Redeemed Value LE 4,194,458,592. - The Market Value Per Certificate Reached EGP 136.86 On 31/12/2008. - The Bank Portion Got 2,321,802 Certificates With Redeemed Value EGP 317,761,822 . (2) Istethmar Fund - CIB Established The Second Accumulated Return Mutual Fund Under License No.344 Issued From Capital Market Authority On 26/02/2006. CI Assets Management Co.- Joint Stock Co - Manages The Fund. - The Number Of Certificates Reached 3,481,368 With Redeemed Value LE 227,368,144. - The Market Value Per Certificate Reached EGP 65.31 On 31/12/2008. - The Bank Portion Got 174,072 Certificates With Redeemed Value EGP 11,368,642. (3) Aman Fund (CIB & Faisal Islamic Bank Mutual Fund) - The Bank & Faisal Islamic Bank Established An Accumulated Return Mutual Fund Under License No.365 Issued From Capital Market Authority On 30/07/2006. CI Assets Management Co.- Joint Stock Co - Manages The Fund. - The Number Of Certificates Reached 1,227,413 With Redeemed Value LE 68,501,920. - The Market Value Per Certificate Reached EGP 55.81 On 31/12/2008. - The Bank Portion Got 30,686 Certificates With Redeemed Value EGP 1,712,586. CIB 2008 ANNUAL REPORT FINANCIAL STATEMENTS 127 38- Transactions With Related Parties All Banking Transactions With Related Parties Are Conducted In Accordance With The Normal Banking Practices And Regulations Applied To All Other Customers Without Any Discrimination. - Loans & Overdrafts - Investment in Subsidiary Companies - Customer Deposits - Contingent Accounts Income And Expenses With Related Parties Are Represented As Follows: - International Co. for Security & Services - Egypt Factors - Corplease Co. - Commercial International Life Insurance Co. 39- Acquisition Cost EGP 319,307,234 192,258,365 141,667,446 47,864,230 Income (EGP) Expenses (EGP) 1,001,416 82,463 48,104,095 7,265,684 36,639,026 140,860 575,188 1,812,838 In July 9,2008 The bank acquired 49.89% as an extra portion in CI Capital Co. to be 99.89% and the Provisional-Consolidation process has been finished at the end of year 2008 and the consolidation process has a result of goodwill in amount of EGP 384,221,251 in the acquisition date. As a result of current financial turmoil in the international and local markets, a sharp decline in market indicators has been witnessed from October 2008, so the bank has prepared a study to determine the impairment value in the Goodwill which showed a decline with amount of EGP 183,698,000 which has been carried with income statement at the end of the year Intangible Assets which has been acquired at the acquisition date are determined as follows: 1- Brand 2- Licenses 3- contracts 4- customer relationships Total Amortization from July 2008 Net Intangible Assets EGP 336,790,272 20,000,000 119,694,389 198,187,745 674,672,406 (33,733,620) 640,938,786 Economic Benefits for the intangible assets are determined to amortized in 10 years unless there is an indicator for the declining and to be carried with income statement. 8 0 0 2 3 . 3 9 4 , 6 0 . 1 9 3 , 4 0 . 9 4 4 , 2 1 4 . 9 7 0 , 5 7 0 0 2 2 . 3 5 9 , 4 1 . 2 8 7 , 3 1 7 . 8 4 9 , 2 0 . 5 4 7 , 3 6 0 0 2 9 . 2 4 7 , 3 7 . 2 3 4 , 5 7 . 8 5 0 , 4 4 . 3 6 3 , 5 5 0 0 2 7 . 7 7 0 , 3 6 . 6 0 4 , 3 3 . 4 9 4 , 3 1 . 5 9 2 , 5 4 0 0 2 8 . 0 7 9 , 2 0 . 0 5 6 , 4 0 . 3 4 9 , 2 3 . 2 6 1 , 3 3 0 0 2 3 . 4 7 6 , 2 0 . 2 8 7 , 3 2 . 7 2 4 , 1 3 . 4 1 1 , 3 2 0 0 2 6 . 0 5 0 , 2 7 . 0 0 9 , 2 6 . 1 2 3 , 1 1 . 2 1 0 , 2 1 0 0 2 5 . 9 2 8 , 1 9 . 7 4 3 , 2 2 . 8 0 8 1 . 7 4 9 , 1 0 0 0 2 0 . 8 1 6 , 1 7 . 6 5 0 , 2 7 . 2 8 6 4 . 6 9 5 , 1 3 . 0 3 3 , 6 2 0 . 8 7 4 , 0 2 7 . 4 6 4 , 7 1 1 . 9 3 0 , 4 1 5 . 4 9 3 , 3 1 2 . 5 0 5 , 2 1 7 . 8 1 9 , 0 1 2 . 7 0 1 , 1 1 0 . 3 1 3 , 0 1 5 . 4 6 9 3 . 5 1 7 9 . 4 0 7 1 . 7 0 6 0 . 5 7 4 . 3 7 0 , 1 3 . 2 6 8 8 . 7 9 4 2 . 1 0 7 4 . 6 7 3 5 . 1 6 5 8 . 4 9 2 4 . 8 1 4 0 . 2 3 2 7 . 9 3 3 2 . 5 1 2 9 . 7 7 3 6 . 3 8 1 5 . 0 3 2 0 . 6 3 1 9 9 9 1 7 . 2 3 6 , 1 4 . 9 7 3 , 1 1 . 1 1 3 6 . 4 2 5 , 1 7 . 1 4 8 , 9 0 . 6 1 2 1 . 0 1 1 s t n e m e t a t S l i i a c n a n F a m r o F o r P 7 . 7 2 1 , 7 5 5 . 2 6 6 , 7 4 5 . 2 2 4 , 7 3 5 . 9 8 3 , 0 3 7 . 6 7 9 , 7 2 4 . 3 5 1 , 4 2 6 . 8 5 7 , 9 1 4 . 1 0 6 , 8 1 3 . 3 3 6 , 6 1 6 . 5 1 0 , 5 1 8 0 0 2 7 0 0 2 6 0 0 2 5 0 0 2 4 0 0 2 3 0 0 2 2 0 0 2 1 0 0 2 0 0 0 2 9 9 9 1 1 . 8 3 9 , 8 4 5 . 4 1 5 , 9 3 2 . 0 0 6 , 1 3 3 . 0 7 8 , 4 2 2 . 9 7 9 , 3 2 7 . 4 1 4 , 0 2 7 . 4 1 8 , 5 1 8 . 3 9 9 , 3 1 1 . 5 7 3 , 1 1 3 . 7 8 1 , 0 1 - 5 . 3 1 2 2 . 8 7 4 3 . 9 0 1 8 . 7 5 5 , 1 9 . 6 3 6 - 7 . 6 3 3 1 . 7 7 3 , 2 3 6 4 . 1 6 1 0 . 0 3 1 , 1 - 2 . 9 9 2 . 7 8 2 5 . 2 1 2 , 1 7 . 9 1 7 2 . 0 0 2 - 3 . 8 9 7 . 4 2 2 7 . 5 8 2 - 1 2 1 5 . 3 8 1 , 1 9 . 3 7 9 , 1 1 . 3 4 2 , 1 - 3 . 3 6 1 5 . 2 4 2 4 . 0 7 2 5 . 4 5 1 , 1 9 . 7 2 3 8 . 8 3 2 0 0 3 6 2 3 1 . 5 8 2 9 . 9 8 2 0 0 6 8 6 7 7 . 3 3 0 , 1 3 . 9 8 0 , 1 8 8 2 0 0 6 9 . 6 7 1 9 . 6 9 3 , 1 9 . 2 3 3 , 1 4 . 9 6 2 4 . 6 6 2 0 0 6 6 . 3 0 3 , 1 3 . 2 2 0 , 1 1 . 2 7 6 , 5 7 . 7 2 1 , 7 5 0 0 . 0 8 0 , 4 5 . 2 6 6 , 7 4 0 9 . 9 3 0 , 3 5 . 2 2 4 , 7 3 0 1 . 7 2 5 , 2 5 . 9 8 3 , 0 3 0 1 . 3 2 1 , 2 7 . 6 7 9 , 7 2 0 0 . 8 0 9 , 1 4 . 3 5 1 , 4 2 0 4 . 7 1 7 , 1 6 . 8 5 7 , 9 1 0 3 . 5 7 5 , 1 4 . 1 0 6 , 8 1 0 5 . 3 6 4 , 1 3 . 3 3 6 , 6 1 0 6 . 6 6 3 , 1 6 . 5 1 0 , 5 1 8 0 0 2 7 0 0 2 9 . 2 7 7 , 3 7 . 3 9 9 , 2 6 0 0 2 8 . 7 1 3 , 2 5 0 0 2 2 . 8 2 0 , 2 ) 7 . 3 6 9 , 1 ( ) 7 . 6 9 7 , 1 ( ) 2 . 8 7 3 , 1 ( ) 3 . 2 3 1 , 1 ( 2 . 9 0 8 , 1 5 . 4 6 4 , 1 ) 3 . 3 2 0 , 1 ( ) 5 . 4 9 3 ( 9 . 5 5 8 , 1 ) 8 . 9 0 2 ( ) 0 . 1 3 ( 1 . 5 1 6 , 1 % 1 3 2 . 7 9 1 , 1 0 . 6 1 1 , 1 ) 5 . 1 6 6 ( ) 4 . 0 5 2 ( 9 . 0 0 4 , 1 ) 0 . 0 8 1 ( 2 . 2 1 % 4 5 8 . 2 3 2 , 1 6 . 9 3 9 7 . 7 1 8 ) 3 . 4 8 6 ( ) 3 . 4 9 1 ( 7 . 8 7 8 ) 8 . 3 8 ( 1 . 7 0 . 2 0 8 % 1 3 9 . 5 9 8 7 . 9 8 5 ) 0 . 0 1 5 ( ) 9 . 4 6 3 ( 6 . 0 1 6 ) 0 . 4 3 ( 5 . 3 3 1 . 0 1 6 % 1 2 4 0 0 2 1 . 7 1 6 , 1 ) 2 . 8 0 9 ( 9 . 8 0 7 8 . 3 6 5 ) 4 . 4 4 4 ( ) 7 . 2 7 2 ( 7 . 5 5 5 ) 0 . 0 5 ( 7 . 5 0 5 % 3 2 3 0 0 2 9 . 7 4 4 , 1 ) 1 . 9 6 8 ( 8 . 8 7 5 5 . 2 3 4 ) 2 . 7 6 2 ( ) 3 . 0 5 2 ( 8 . 3 9 4 ) 2 . 1 8 ( % 8 6 . 2 1 4 2 0 0 2 5 . 0 9 3 , 1 ) 4 . 3 8 8 ( 1 . 7 0 5 7 . 3 2 4 ) 6 . 3 0 2 ( ) 4 . 4 0 3 ( 8 . 2 2 4 ) 9 . 1 4 ( % 5 - 9 . 0 8 3 1 0 0 2 4 . 3 6 3 , 1 ) 3 . 5 2 9 ( 1 . 8 3 4 0 . 5 5 4 ) 5 . 9 8 1 ( ) 5 . 2 5 2 ( 1 . 1 5 4 ) 3 . 9 4 ( % 4 8 . 1 0 4 0 0 0 2 6 . 1 9 3 , 1 ) 6 . 3 4 9 ( 0 . 8 4 4 5 . 4 9 3 ) 2 . 9 8 1 ( ) 6 . 8 3 1 ( 7 . 4 1 5 ) 7 . 9 2 1 ( 0 . 5 8 3 % 0 1 9 9 9 1 1 . 2 6 1 , 1 ) 8 . 5 6 7 ( 3 . 6 9 3 2 . 2 9 2 ) 3 . 3 7 1 ( ) 6 . 6 8 ( 6 . 8 2 4 ) 7 . 7 7 ( 9 . 0 5 3 % 3 1 l a c i r o t s i H s r a e Y 0 1 E B C m o r f e u D d n a h s a C s k n a B m o r f e u D s t e s s A k n a B i i ) s n o s v o r p f o t e n ( s e c n a v d A & s n a o L s t e s s A y r d n u S t n e m t s e v n I i s t e s s A g n k n a B - n o N s t e s s A l a t o T s e v i t a v i r e D s t i s o p e D r e m o t s u C s e i t i l i b a i L k n a B s t i s o p e D k n a B g n i r a h S t i f o r P d n a s d n e d v D i i i s g n w o r r o B m r e t - d M i s d n o B h t r o W t e N & s e i t i l i b a i L l a t o T s e v i t a v i r e D h t r o W t e N t n e m e t a t S s s o L & t i f o r P e m o c n I t s e r e t n I t e N e m o c n I r e h t O & s e e F A & G S e s n e p x E t s e r e t n I e m o c n I t s e r e t n I m e t I s e s n e p x E r e h t O & s n o s v o r P i i ) T B P N ( x a T e r o f e B t i f o r P t e N x a T e m o c n I l a r e n e G x a T d e r r e f e D s e i t i l i i b a L r e h t O & s n o s v o r P i i s l l i B y r u s a e r T ) T A P N ( x a T r e t f A t i f o r P t e N h t w o r G 08 A N N U A L R E P O R T Branches & Public Units "Individually, we are one drop. Together, we are an ocean." Ryunosuke Satoro Branches & Public Units Year 2008 2007 2006 2005 2004 2003 Branches Units & FX Total 104 88 74 61 53 43 48 45 39 39 38 44 152 119 100 92 81 82 180 160 140 120 100 80 60 40 20 0 Total Branches 152 119 100 92 82 81 2003 2004 2005 2006 2007 2008 CIB 2008 ANNUAL REPORT BRANCHES & PUBLIC UNITS 131 Port Ghalib Branch w w w . c i b e g . c o m 

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